Gold prices are doing well in early European trading, likely due to expected US rate cuts and a rise in safe-haven demand. After a significant drop of 4.5%, the biggest single-day loss since October, gold has seen a slight recovery. This decline was influenced by higher margin requirements set by the CME Group. Forecasts suggest that Fed rate cuts in 2026 might limit the drop in gold prices, making it less costly to hold onto. Ongoing global economic uncertainties and geopolitical tensions may also boost interest in traditional assets like gold.

Thin Trading Volumes Expected

As we approach the New Year holidays, trading volumes are likely to be low. Traders are awaiting the release of the Federal Open Market Committee (FOMC) Minutes, which could impact the market. Geopolitical tensions are rising after Russia claimed a Ukrainian drone strike, which Ukraine has denied. These tensions, along with the CME’s increased margin requirements for gold, have affected trading strategies. Currently, gold prices look positive as they stay above the 100-day EMA. Resistance is at $4,520, while support is in the $4,300 range. Central banks, being the largest holders of gold, added a substantial amount to their reserves in 2022. Remember, gold’s price often moves opposite to that of the US Dollar and Treasuries. As December 30, 2025, approaches, thinner trading volumes could lead to sharper price movements. Many traders are closing positions to secure profits and prepare for the upcoming year, urging caution due to the unpredictable nature of low liquidity.

Outlook for January and Beyond

In January, derivative markets are indicating a rise in call options with strike prices over $4,500, suggesting some traders are gearing up for a price rally early in the new year. However, with the Relative Strength Index (RSI) at a neutral level, we might see sideways movement until a clear trend forms. The upcoming FOMC minutes will be a key event to watch. The main factor supporting a positive outlook is the growing expectation of Federal Reserve rate cuts in 2026. The CME FedWatch tool shows that markets now predict an over 80% chance of at least one rate cut by the March 2026 meeting. Recent economic data, like the November Core PCE inflation rate at 2.9%, gives the Fed more reasons to start easing its policies. There is also strong support from central banks, creating a solid foundation for gold’s price. Reports from the World Gold Council for 2025 indicate that central banks’ net purchases are set to match the record levels from 2022 and 2023. This strong institutional demand, especially from emerging markets, emphasizes gold’s role as an essential asset for diversifying away from the US dollar. From a trading perspective, we should monitor the $4,300 level for support. A significant drop below this could signal a deeper correction, which might present a better buying opportunity for those looking at long-term gains. On the other hand, a sustained move above the $4,520 resistance is necessary to confirm that the uptrend is returning toward all-time highs. Create your live VT Markets account and start trading now.

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