Gold’s value has fallen as optimism around US-China trade talks has led investors to seek riskier assets. This has created a weaker start for XAU/USD. However, expectations of more interest rate cuts from the Federal Reserve and a slight decline in the US Dollar might limit gold’s losses. Analysts predict two more rate cuts this year, backed by recent consumer inflation data. This could weaken the US Dollar and help stabilize gold prices. Investor sentiment is improving as key US and Chinese officials have agreed on a trade framework, reducing the risk of high tariffs. This has boosted stocks and put downward pressure on gold. The market is now looking ahead to the Federal Open Market Committee meeting for future guidance. Additionally, geopolitical issues, especially involving Russia, may impact gold’s safe-haven appeal.

Technical Analysis Of Gold

Gold is currently at crucial Fibonacci retracement levels, with prices around $4,000. Price movements are limited, with resistance expected near the $4,109-$4,110 range. A breakout could push gold towards $4,200 or higher. Central banks are still strong buyers of gold, having added 1,136 tonnes to their reserves in 2022. Gold prices generally rise when the US Dollar weakens. Gold is experiencing familiar fluctuations, with prices softening as traders take on more risk. Recent advances in US-China tech trade discussions in Geneva have boosted global stocks, similar to optimism seen during past summit meetings in early 2020. This reduces demand for safe-haven assets like gold, putting mild pressure on prices. Yet, any significant drop in gold seems limited due to changing expectations for Federal Reserve policies. The CME FedWatch tool indicates there’s now more than a 60% chance of a rate cut by March 2026, a shift following a recent lower-than-expected Personal Consumption Expenditures (PCE) report of 2.9%. This sentiment is keeping the US Dollar’s strength in check and providing a cushion for gold prices.

Geopolitical Risks And Market Strategies

Persistent geopolitical issues, including the ongoing Ukraine conflict and rising tensions in the Strait of Hormuz, discourage aggressive bets against gold. We also need to consider the strong demand from central banks, which have been significant purchasers since adding 1,082 tonnes in 2022. This demand serves as strong long-term support for gold. With this balanced outlook, derivative traders might look at strategies that benefit from steady price movements or sudden volatility spikes. One option is to sell a short strangle by writing out-of-the-money puts near $3,950 and calls around $4,150, especially for those anticipating consolidation ahead of the November FOMC meeting. This approach allows traders to collect premium while defining a specific price range. Alternatively, for those who think the upcoming FOMC meeting will bring a major change, a long straddle may be a better choice. This strategy would profit from significant price movements in either direction, whether that means a fall below the key $4,000 support or a rise above $4,160 resistance. The key will be timing the entry to manage premium decay costs in the next few weeks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now