Gold has reached new highs for the third day in a row due to global uncertainty. Fears of a trade war and geopolitical risks, particularly President Trump’s tariff threats against eight European nations regarding Greenland, are boosting gold’s appeal as a safe investment. Even though the US Dollar has seen a slight recovery, gold prices remain below $4,900 because of overbought conditions. These conditions, along with anti-risk sentiment and the “Sell America” trade, continue to push gold prices upward. Market participants are awaiting US inflation and GDP growth data to guide the Federal Reserve’s policy decisions.

Gold And Bond Yields

Political tensions over Greenland have caused a rise in bond yields, further benefiting gold. A trend of moving away from the dollar increases uncertainty, making gold more appealing as the US Dollar weakens. Additionally, the prospect of fewer interest rate cuts by the Fed in 2026 offers little support for the dollar. Technical signals indicate that gold’s upward trend may continue. The Moving Average Convergence Divergence (MACD) and a positive Relative Strength Index (RSI) show ongoing buyer interest despite overbought conditions. Traders are likely to react positively, which could limit any potential pullbacks. The US Dollar is showing mixed results against major currencies, remaining strong against the Swiss Franc. At the end of 2025, there was a strong push towards safety, driving gold prices to nearly $4,900 due to US-Europe tariff threats over Greenland. As we move into January 2026, gold has slightly cooled and is stabilizing around $4,850. This pullback presents an important decision point for traders in the coming weeks.

US Dollar And Strategy

The “Sell America” trade that was prevalent in late 2025 seems to be slowing down, as the US Dollar Index has bounced back by 1.5% in the new year. This recovery is bolstered by last week’s hawkish minutes from the Federal Reserve meeting and a decrease in the VIX from nearly 35 in December to about 22 now. Recent data indicates that inflows into gold-backed ETFs have slowed for the first time in six months, hinting at some profit-taking by large funds. Given the overbought conditions at the end of last year, purchasing futures outright carries a significant risk of a deeper correction. A smarter approach may be to buy call options on gold, such as options with a $4,950 strike price expiring in March 2026. This strategy lets us take part in any potential rally while setting a clear limit on our possible losses if the dollar keeps strengthening. Since implied volatility in gold options has decreased from its peak in December 2025, selling out-of-the-money puts could also be an effective way to generate income. For instance, selling a February 2026 put with a strike price around the old support level of $4,700 aligns with the belief that declines will be limited. This strategy profits from time decay and the expectation that gold won’t drop sharply in the near future. Create your live VT Markets account and start trading now.

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