Gold is currently trading within a narrow range as traders await results from the Federal Open Market Committee (FOMC) meeting. The anticipated interest rate cuts from the Federal Reserve have weakened the US Dollar, providing some support for gold prices. The metal is hovering near its weekly high, influenced by ongoing economic policies and global tensions. — ### The Fed’s Monetary Policy The US Federal Reserve is likely to announce a 25 basis point interest rate cut, even with rising inflation pressures. According to the PCE Price Index, inflation was above the Fed’s 2% target for September. However, factors like slow job growth may help ease inflation in the coming months. The US Job Openings report indicated that job vacancies rose to 7.67 million in October, suggesting a strong labor market. Gold is trading in a familiar range around $4,200. If prices rise above this level, they could reach $4,278 or even $4,300. On the other hand, if prices drop, buyers may step in around $4,165, but a fall below this level might lead to a drop toward $4,115—an important level for traders keeping an eye on the Fed. Gold is in a holding pattern as we await the Federal Reserve’s decision later today, December 10, 2025. A 25 basis point rate cut is widely expected, which is keeping the US Dollar weak and supporting gold. The key moments will come during Jerome Powell’s press conference and the Fed’s future guidance. — ### Fed’s Rate Cut and Economic Outlook We expect this rate cut despite persistent inflation from earlier this autumn. The Fed appears more focused on signs of slowing economic growth and a weakening labor market. This indicates they are prepared to act preemptively to prevent a sharper downturn in 2026. Recent data backs this view and lends credibility to a more dovish stance. The November Consumer Price Index (CPI) showed headline inflation easing to 2.8%, while the latest job report revealed payroll growth of only 155,000, falling short of expectations. This stands in contrast to the strong job openings data from a few months ago, signaling that the labor market may be losing momentum. For derivative traders, the uncertainty leading up to the announcement suggests using options to manage potential volatility. A long straddle—buying both a call and a put option with the same strike price around $4,220—could be effective. This strategy benefits from significant price movements in either direction once the Fed’s path becomes clearer. After Powell speaks, it will be essential to monitor key technical levels for confirmation before using futures contracts. A sustained break above the $4,250 resistance level would signal a bullish trend, targeting $4,300. Conversely, a clear move below the $4,165 support could trigger short positions. This situation is reminiscent of 2019 when the Fed began an “insurance” cutting cycle due to global growth concerns, even with a stable domestic economy. Following that trend, this could be the first of multiple cuts designed to ensure a smooth economic landing. Such actions may create lasting support for gold prices as we head into the new year. — Create your live VT Markets account and start trading now.

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