Gold continues its upward trend for the seventh day in a row but has difficulty breaking past the $5,100 level. Its rise is fueled by global uncertainties, central bank purchases, and rising retail demand. Hopes for US Federal Reserve interest rate cuts in 2026 also support gold’s momentum. However, the US Dollar is gaining strength due to repositioning trades before the upcoming FOMC meeting, which negatively affects gold. Traders are staying cautious, waiting for guidance from the Fed, which will influence the direction of both the USD and gold.

US Tariff Threats and Geopolitical Risks

US President Trump’s tariff threats create more uncertainty, along with geopolitical tensions from the ongoing Russia-Ukraine conflict. Gold’s momentum is sustained by a weakening US Dollar and the Fed’s dovish stance. A rise in Durable Goods Orders in November could pause the USD’s downward trend as focus shifts to the FOMC meeting. Central banks, particularly the People’s Bank of China, continue to purchase gold, significantly increasing demand through exchange-traded funds. Chart indicators suggest that gold may be facing a bullish exhaustion phase despite ongoing buying interest. The RSI is currently overbought, indicating caution among buyers. A recovery in the MACD is necessary to maintain upward movement, and breaking above $5,156.89 is critical for extending the bullish trend. The USD continues to strengthen against other major currencies, particularly the Japanese Yen. As of January 27, 2026, gold’s momentum is strong, but it faces a critical barrier at the $5,100 level. With the Federal Reserve’s policy decision expected tomorrow, a rise in market volatility is likely. Therefore, using options to manage risk appears to be the safest strategy for the upcoming days. The ongoing bullish trend is backed by strong foundational factors, including persistent geopolitical tensions and active central bank buying. We suggest considering buying call options or initiating bull call spreads with strike prices above the $5,157 resistance level. This approach allows you to take part in a potential price surge following a dovish Fed statement while limiting maximum losses if the market turns against you.

Recent Data and Market Strategies

The optimistic sentiment for gold is supported by recent data. The World Gold Council’s latest report revealed that central banks added a net of 290 tonnes in the fourth quarter of 2025, the highest quarterly increase since 2022. Moreover, the December 2025 Consumer Price Index (CPI) report showed an inflation rate of 2.8%, suggesting that the Fed might have room for rate cuts as inflation decreases. Despite this positive outlook, traders should remain cautious due to overbought technical signals, like an RSI reading above 70. If Fed Chair Jerome Powell adopts a surprisingly hawkish tone, it could lead to a sharp decline in gold prices as the USD strengthens. To hedge against this risk, buying short-term put options with a strike price near the $4,970 support level could provide significant protection for current long positions. For those anticipating a major price swing but unsure about the direction, a long straddle strategy might be effective. By purchasing a call and a put option with the same strike price and expiration date, traders can profit from a substantial price movement in either direction following the FOMC announcement. This strategy bets purely on the expected increase in volatility. Looking beyond this week’s Fed meeting, the overall environment remains very supportive for gold. Historically, gold has done well during Fed easing cycles, like the one in 2019 that saw a rally of over 15% in six months. Any temporary price dip caused by short-term USD strength should be seen as a potential buying opportunity for long-term call options. Create your live VT Markets account and start trading now.

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