Gold made gains on Monday, boosted by expectations of a Federal Reserve rate cut that weakened the US Dollar. Geopolitical tensions also supported gold’s rise, but gains were somewhat limited as traders awaited the FOMC rate decision on Wednesday. Even with the recent increases, the gold market remains cautious, looking for insights on the Fed’s rate-cut plans before making strong commitments. The results of the meeting, economic forecasts, and comments from Fed Chair Jerome Powell will significantly affect future gold prices. The US Commerce Department reported a 2.8% increase in the PCE Price Index for September, which supports the idea of a Fed rate cut. With almost a 90% chance of a cut already priced in, traders are seeking more clues about future policies. Additionally, geopolitical instability often boosts gold prices as it acts as a safe haven. Technical support for gold is around the $4,190 level; if prices dip below this, a decline could follow. On the upside, resistance near the $4,250-$4,260 range might push prices toward $4,300, continuing the upward trend. The US Dollar performed best against the Swiss Franc but weakened against many other major currencies. The dollar’s value against various currencies shows mixed trends. As of Monday, December 8th, 2025, gold shows signs of strength, but traders are cautious ahead of the Federal Reserve’s decision on Wednesday. The market has nearly fully priced in a rate cut, with CME’s FedWatch tool indicating about a 90% probability. This anticipation keeps the US Dollar weak, which usually benefits gold. This wait for a significant event hints that using options for volatility might be a smart strategy. A long straddle or strangle, which involves buying both a call and a put option, could allow traders to profit from any big price movement, regardless of direction. Historically, Fed announcements have led to sharp price swings, like the $50 jump in gold following the September 2024 policy change. For those who are optimistic, buying call options with strike prices above the $4,260 resistance might be a direct way to benefit from a more dovish Fed statement than expected. The ongoing geopolitical tensions and the weak dollar create a favorable environment for this trade. A bull call spread could also help lower the upfront costs of the position. This optimistic outlook is reinforced by recent economic data. The latest jobs report for November showed Non-Farm Payrolls growth slowing to 155,000, while the most recent CPI report indicated core inflation at 2.7%. These figures strengthen the case for the Fed to continue easing measures to support the slowing economy. However, since a rate cut is widely expected, the real risk lies with a hawkish surprise from Fed Chair Powell. Traders might want to consider buying put options with a strike price below the key support level of $4,190. This strategy would guard against a situation where the Fed suggests future cuts are not guaranteed, potentially leading to a swift sell-off. For those already holding long gold futures, purchasing puts can serve as an inexpensive insurance policy during this week’s uncertainty. Although the dollar has been weak in the past month, reflected in its 1.34% drop against the Australian dollar, any hint of a hawkish Fed could lead to a quick reversal, which would be a significant challenge for gold prices.

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