Gold prices are falling during a volatile trading session. This drop is driven by a strong US Dollar as investors become more cautious. Gold fell below the key level of $4,150 before the US market opened and reached intraday lows of about $4,130. Indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) signal a bearish trend. Current support is at $4,100, close to a trendline from early November, with another key level at $4,050.

Resistance Levels For Gold

Immediate resistance is found at $4,210 and $4,245. For gold to rise towards $4,380, it needs to break these levels. Gold has historically been a safe investment during uncertain times. In 2022, central banks, the biggest holders of gold, purchased 1,136 tonnes. Countries like China, India, and Turkey increased their gold buying, reflecting strong demand. Gold usually goes up when the US Dollar and Treasuries fall, making it a good option for diversification. Geopolitical issues and fears of recession can push gold prices up, especially when interest rates are low. The behavior of the US Dollar greatly affects gold prices. With the current decline in gold, we need to monitor the strength of the US Dollar closely. The Dollar Index (DXY) has risen above 106.00 this week, following signals from Federal Reserve officials that a rate cut in December 2025 is now less likely. This news is putting pressure on gold, pushing it below the crucial $4,150 support level.

Fed’s Influence On Gold

The Federal Reserve’s strong stance is backed by recent economic data. The latest Consumer Price Index showed inflation stubbornly high at 3.5%, and the jobs report added 210,000 nonfarm payrolls. This solid data gives the central bank reason to delay easing, which impacts non-yielding assets like gold. In the coming weeks, the bearish technical signals suggest we should adopt a cautious approach. The drop below $4,150 opens the way to the next support level at $4,100. Derivative traders might think about buying put options with a strike price around $4,100 or using bear call spreads to profit from a potential decline or sideways movement. However, we must remember the ongoing strong support from central bank purchases, a trend that has continued since record highs in 2022. The World Gold Council reported that more than 1,000 tonnes were added to reserves in 2024, and another 950 tonnes were bought in the first three quarters of 2025. This consistent demand suggests that if prices drop closer to $4,050, it could present a significant buying opportunity for long-term investors. As a result, a contrarian strategy could be to prepare for a rebound from these lower levels. Selling cash-secured puts with a strike price around $4,050 could bring in premium while waiting for a good entry point. If the market starts showing signs of recovery at that trendline support, we would consider adjusting our strategy from defensive to cautiously bullish. Create your live VT Markets account and start trading now.

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