Gold has taken a step back, ending its record-breaking run. Its value has dropped by about 8% from its highest point. This dip is partly due to market reactions to possible changes in US monetary policy. Even with these declines, there is still a lot of uncertainty in the market, especially with ongoing geopolitical tensions.

Silver Reduction

Silver has also seen a decrease, falling roughly 12% from its peak. While these drops are noticeable, they don’t mean that the trend of debasement trade or moving away from the US is entirely stopped. Looking back to mid-2025, gold pulled back about 8% after reaching record highs, mostly due to discussions about changes in US monetary policy. That period of consolidation now seems to be a brief break in a longer upward trend. Currently, gold is testing those previous highs again, with persistent inflation continuing to worry the market. December 2025’s Consumer Price Index (CPI) showed inflation stubbornly at 3.8%, suggesting that the currency debasement trade isn’t over. This situation means that any price dips could present good buying opportunities. With the Federal Reserve’s “higher-for-longer” stance, uncertainty remains, pushing up implied volatility in gold options. Recent data indicates that the Gold Volatility Index (GVZ) rose nearly 15% in the last quarter of 2025. Traders might consider buying straddles or strangles on gold ETFs to take advantage of significant price movements, no matter the direction, in the weeks ahead.

Defined Risk Strategies

The retracement in 2025 highlighted gold’s sensitivity to interest rate expectations, creating a chance for defined-risk bullish strategies. A bull call spread on gold futures is a solid way to benefit from potential price increases while keeping risks in check. This strategy lets traders take part in a possible breakout without full exposure to sudden changes from the central bank. Additionally, silver faced an even steeper 12% correction in 2025, showing its higher sensitivity to industrial demand. With the latest manufacturing PMI data for January 2026 showing some weakness, silver might trail behind gold’s performance as a safe haven. This opens up a pair trade opportunity: going long on gold and short on silver, allowing traders to separate the monetary-driven rally from industrial weaknesses. Create your live VT Markets account and start trading now.

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