**Gold As A Safe Haven Asset** Central banks are major buyers of gold. They purchase it to diversify their reserves and strengthen their economies. In 2022, they bought 1,136 tonnes of gold, worth about $70 billion, making it the largest annual acquisition on record. Countries like China, India, and Turkey are boosting their gold reserves. Gold usually moves opposite to the US Dollar and Treasuries. When the Dollar falls, gold tends to rise, helping to diversify investments during times of crisis. Additionally, gold and riskier assets often have an inverse relationship: gold prices drop when the stock market rebounds and rise during market downturns. Gold’s price can also increase due to geopolitical tensions or fears of recession, as it is seen as a safe haven. Interest rates affect gold prices as well; lower rates tend to increase gold’s attractiveness, while higher rates can lower its appeal. Moreover, gold prices typically rise when the Dollar weakens. **Expectations For Future Gold Prices** Recently, gold prices have been increasing, indicating a larger trend. After maintaining high interest rates through 2024 and much of 2025, the market now expects a more relaxed approach from central banks. Since gold does not earn interest, it becomes more appealing when rates are anticipated to drop. Central banks have continued their strong buying into 2025, building on record purchases made in 2022 and 2023. The World Gold Council reported that banks in emerging markets added over 800 tonnes in 2023 alone. This strong demand creates a solid support for prices and shows a continued effort to move away from reliance on the US Dollar. The US Dollar Index has declined significantly since reaching highs in late 2024, and we expect this trend to continue as the Federal Reserve begins to ease its policies. This relationship is crucial; a weaker Dollar increases the buying power of other currencies for gold, which is priced in Dollars. Thus, any further weakness in the Dollar is a positive sign for gold. Given this environment, we recommend considering call options to take advantage of potential gains in the coming weeks. Current implied volatility in the options market is moderate, making long call strategies a cost-effective way to express a bullish outlook. Focus on contracts that expire after the next major central bank meetings to benefit from any policy announcements. For a more cautious approach, bull call spreads can be used. This involves financing the purchase of at-the-money calls by selling out-of-the-money calls. This strategy reduces initial costs and can work well if we expect a steady price increase without a major surge. It allows for profit while managing risk. Create your live VT Markets account and start trading now.

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