Gold prices plunged nearly 10% in just 24 hours, now sitting around $5,080. This drop reflects market concerns about Kevin Warsh’s potential appointment as the next Federal Reserve Chairman and ongoing geopolitical tensions, with traders closely watching the $5,000 level. Technical analysis reveals that gold is nearing a bearish “Evening Star” pattern on the daily chart. The MACD shows a bearish signal after crossing below the Signal line, and the RSI is at 43.76, indicating further downward pressure.

Key Technical Levels

If gold drops below $5,000, attention may shift to the 100-period SMA at $4,822. On the other hand, if prices rebound, they could test the previous intra-day high of $5,450, potentially heading toward the all-time high of $5,595. Gold is regarded as a safe-haven asset and a way to protect against inflation. Central banks are its biggest buyers, adding 1,136 tonnes to their reserves in 2022. Gold prices are influenced by the US Dollar; a strong Dollar tends to lower prices, while a weak Dollar can boost them. Gold typically moves in the opposite direction of the US Dollar and riskier assets. Lower interest rates and geopolitical unrest often lead to higher gold prices due to its safe-haven appeal. Looking back to early 2025, gold faced resistance at $5,600, sparking the bearish correction many anticipated. This decline found support near $4,800 before slowly rebounding over the following months. With gold currently around $5,250, the market is at a crucial point.

Impact of Fed Policy and CPI

Should Kevin Warsh be appointed as Fed Chair, we may see a more hawkish stance, which usually poses challenges for non-yielding assets like gold. However, with December 2025’s CPI data coming in slightly higher than expected at 3.1%, the Fed’s ability to raise rates further is under scrutiny. This conflict between hawkish policy and ongoing inflation creates considerable market uncertainty. Strong institutional demand continues to support gold prices. Final figures indicate that global central banks added a record 1,200 tonnes of gold to their reserves in 2025, surpassing the 2022 peak. This steady demand, particularly from emerging markets, may cushion prices during corrections. Given this complicated environment, making outright directional bets could be risky. Derivative traders might explore strategies that benefit from rising volatility. Implied volatility for gold options has reached a three-month high, suggesting a significant price move is likely soon. We see value in using long straddles or strangles to leverage a possible breakout from the current consolidation range. Create your live VT Markets account and start trading now.

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