Gold prices climbed over 0.10% after the latest US inflation report showed rising prices, which weren’t enough to stop the Federal Reserve from planning interest rate cuts. XAU/USD bounced back from daily lows, trading at $4,127, supported by a softer Consumer Price Index that matched expectations. There’s a 96% chance that interest rates will be reduced in the upcoming Fed meeting. Meanwhile, the US and China are preparing for talks as tariff deadlines approach, impacting gold demand. This year alone, gold prices have surged 55% due to trade tensions and central bank purchases.

Gold And Economic Indicators

The US Dollar Index increased by 0.03% to 98.94, while US Treasury yields dipped slightly. September’s inflation was 3%, just below predictions. US business activity picked up in October, but consumer sentiment fell. JPMorgan expects gold to average $5,055 per troy ounce by Q4 2026 due to ongoing demand. Despite minor setbacks, gold continues to trend upwards. It shows strong bullish momentum, with key resistance levels at $4,161 and $4,200. Gold is valued both as a safe-haven investment and a store of value. Central banks added a record 1,136 tonnes in 2022 to bolster their gold reserves amidst economic uncertainty. With the Federal Reserve likely to cut rates next week, we should prepare for more upward movement in gold. The 96% probability of cuts at the October 29 meeting sends a strong signal to traders, suggesting that buying call options or setting up bullish call spreads could be smart moves for potential profits. The weaker-than-expected CPI reading for September has made gold a more attractive option by driving down real yields. The drop in the 10-year real yield to 1.689% is a significant boost for gold, which doesn’t yield interest. Looking back to the Fed’s easing in 2019, we noticed that falling real yields typically led to a major rally in gold prices. Upcoming geopolitical events, like the Trump-Xi meeting and ongoing sanctions against Russia, add uncertainty, reinforcing gold’s position as a safe-haven asset. This may lead to increased price fluctuations, making options strategies that benefit from rising volatility appealing. The Gold Volatility Index (GVZ) has risen to 19.2 this month, reflecting market anxiety, although it’s still below the highs seen during early 2024 banking issues.

Central Bank Demand And Technical Outlook

We cannot overlook the strong demand from central banks, which has been a consistent theme since their record purchases in 2022. Recent data from the World Gold Council for Q3 2025 shows that central banks added another 295 tonnes to global reserves, providing a solid price floor and strengthening the long-term bullish outlook. Technically, we should keep an eye on the October 22 high of $4,161. A strong move above this resistance could lead to a quick rise towards the psychological level of $4,200. Therefore, considering December call options with a $4,200 strike price could help us take advantage of a potential breakout. The conflicting economic data, with strong business activity and declining consumer sentiment, creates a mixed view of the broader economy. The difference between the S&P Global PMI reaching a three-month high and University of Michigan sentiment falling to 53.6 is significant. This disparity often signals upcoming volatility, which usually favors safe-haven assets like gold. Create your live VT Markets account and start trading now.

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