Gold prices have surged by around 60% this year, mainly due to uncertainties in global trade, geopolitical tensions, and concerns about US fiscal stability. Central banks and private investors are buying gold in large amounts, encouraged by the beginning of the Fed’s easing cycle. This push drove gold prices to record highs before a significant drop, marking the biggest decline in 12 years. This downturn was affected by a stronger dollar and lower seasonal demand. Even with this steep decline, the future for gold looks bright due to ongoing economic uncertainty and the need for diversification. Central banks have doubled their gold purchases since 2022, partly because of worries about possible sanctions on foreign assets. The National Bank of Poland is the largest buyer so far this year, with plans to increase its gold reserves substantially.

Role Of ETFs

ETFs have also significantly influenced this year’s gold prices, with holdings rising sharply, especially in September. Compared to the highs of 2022, there’s still room for ETF holdings to grow. Geopolitical issues and central bank demand are key factors supporting this trend, while expectations of more monetary easing help to limit any price drops. Current market fluctuations are seen as a normal correction in a generally positive trend for gold. This week, gold prices pulled back quickly after the impressive 60% increase this year, causing volatility to reach multi-month highs. The CBOE Gold Volatility Index (GVZ) jumped nearly 30% this week, making option purchases more expensive for traders. A safer strategy might be to sell cash-secured puts below current prices, which allows for collecting high premiums while establishing a better entry point. Despite the recent drop, the long-term positive outlook remains strong, backed by ongoing demand from central banks. Latest data from the World Gold Council for Q3 2025 showed that another 250 tonnes were added to official reserves, continuing a trend that started with geopolitical changes in 2022. This continual buying keeps a solid support for the market, reducing how much prices can fall.

Viewing Correction As Opportunity

After a major influx of over 150 tonnes into gold-backed ETFs in September, this week’s price decline has triggered some minor profit-taking. However, holdings are still well below the peaks seen in 2022. With the market now indicating an 85% chance of another Fed rate cut in December (according to CME FedWatch data), any significant price drops are likely to be seen as buying opportunities. This means the recent selling is more of a healthy correction than a shift in the overall trend. Considering the expected volatility ahead but a generally positive outlook, traders should view this correction as a chance to set up new bullish positions. Instead of buying expensive call options, using bull call spreads can help limit costs and define risks. This strategy allows for exposure to potential rebounds while guarding against sudden drops. Create your live VT Markets account and start trading now.

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