Gold remains steady just below $4,000 as traders assess the Federal Reserve’s interest rate decisions and recent discussions between the US and China. The Fed cut rates by 25 basis points, bringing the range to 3.75% to 4.00%. Some members of the Fed expressed differing views on the approach. Technically, gold has resistance around $4,020 and support near $3,900. Gold reached $3,980 after a volatile trading session, marking a 1.20% daily gain. Powell’s comments after the rate cut left future reductions uncertain. As a result, both the dollar and Treasury yields rose. Expectations for another rate cut in December have lessened due to these remarks.

Recent US-China Negotiations

Recent talks between the US and China led to a one-year trade truce, cutting tariffs and allowing US imports to resume. China has promised to continue exporting essential materials, even as economic activities show mixed signals. The Fed plans to pause its securities reduction program in December, which will affect its balance sheet strategy. Powell underscored the difficulties of managing inflation and employment at the same time. The World Gold Council noted a 3% annual increase in gold demand. Central banks are adding reserves, with investment demand seeing a 47% rise. Technically, gold is stable but pressured beneath $4,000, with chances for improvement if it overcomes resistance. As a traditional safe haven against economic uncertainty, gold prices react to geopolitical and economic changes, maintaining a cautious but attentive outlook. The Fed’s recent rate cut was anticipated, but Jerome Powell’s careful message has limited gold’s rally. We see this as a classic “hawkish cut,” where the action is dovish but the guidance is cautious, which has strengthened the US Dollar for now. This explains why gold struggles to maintain gains above the important $4,000 mark.

Economic Data and Market Reaction

The latest Non-Farm Payrolls report from early October 2025 showed a disappointing 95,000 new jobs, raising concerns about a slowing labor market. However, September’s core CPI data is stubborn at 4.2%, causing the Fed to hesitate on signaling further cuts. This stagflation-like situation, similar to what we saw in 2023, creates uncertainty for the December meeting. For derivative traders, this uncertainty presents an opportunity to focus on volatility rather than just direction. The implied volatility on gold options, indicated by the elevated CBOE Gold Volatility Index (GVZ), shows that significant price movement is expected before the year ends. We believe strategies like long straddles or strangles, which benefit from large price swings, are wise as the market processes these conflicting signals. The new one-year trade truce with China temporarily reduces gold’s attractiveness as a geopolitical hedge. This agreement lowers tariffs from about 57% to 47%, alleviating some market fears. However, the ongoing US government shutdown introduces domestic risk that should help support prices. It’s essential to recognize strong support from central banks, which have recently added 220 tonnes to their reserves. The announced end of Quantitative Tightening on December 1st will also increase liquidity in the market, which is favorable for non-yielding assets. This suggests that the $3,900 support level will likely attract significant buying interest if prices dip further. In the coming weeks, we plan to evaluate options to manage our risk around the $3,900 to $4,020 range. A trader could consider buying call options with a strike price above $4,020 to benefit from a potential breakout if the Fed shifts dovishly. Alternatively, purchasing puts below $3,900 would help hedge against a stronger dollar if inflation data remains high. Create your live VT Markets account and start trading now.

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