Gold prices are currently lower, hovering around $4,210 in early Asian trading. This drop comes as traders expect the Federal Open Market Committee (FOMC) to adopt a hawkish approach in their upcoming meeting. The Federal Reserve is likely to implement its third consecutive interest rate cut, possibly lowering the federal funds rate to a target range of 3.50% to 3.75%. The CME FedWatch Tool indicates a nearly 90% chance of this rate cut happening in December, which is an increase from the 71% chance stated earlier this month.

Expectations for Powell’s Press Conference

Experts believe that during his press conference, Fed Chair Jerome Powell will hint at a pause in future rate cuts. This strategy by the US central bank could pressure gold prices in the short term. In the meantime, central banks are still actively buying gold. The People’s Bank of China has increased its gold reserves for the 13th month in a row, adding 30,000 troy ounces last month. Gold has long been seen as a reliable store of value, a safe haven in times of uncertainty, and a hedge against inflation. In 2022, central banks bought 1,136 tonnes of gold, marking the highest annual purchase ever recorded. Gold’s value typically moves in the opposite direction of the US Dollar and Treasuries, serving as a counterbalance during uncertain times. Increased geopolitical tensions or fears of recession can drive up gold prices due to its safe-haven reputation.

Market Expectations and Strategies

Currently, with gold priced around $4,210, today’s FOMC meeting on December 10, 2025, is critical. A rate cut seems almost assured, but the real focus will be on Chairman Powell’s hints regarding future actions. Any indication that this might be the last cut for a while could put immediate downward pressure on gold. The expectation for this rate cut has strengthened after recent economic data showed a clear slowdown. The November 2025 Consumer Price Index (CPI) dropped to 3.1%, a welcome change from higher inflation earlier in the year. Revised Q3 GDP figures indicated the economy grew by only 1.5%. This gives the Fed some room to ease policy, but they will tread carefully to avoid suggesting a complete cutting cycle. With the possibility of a “hawkish cut,” traders in derivatives may look to prepare for a short-term decline in gold prices. They might buy put options with near-term expirations to profit from a potential drop after Powell’s press conference. This approach allows for some risk management if the Fed’s message turns out to be more dovish than anticipated. It’s important to remember how gold reached its current levels. Following the Fed’s shift away from rate hikes in early 2024, gold began a significant rally, surpassing previous highs from the 2020-2023 period. The current price reflects a long-term bullish trend fueled by expectations of lower interest rates. However, strong demand from central banks continues to support gold’s value. According to the latest World Gold Council report for Q3 2025, central banks added another 337 tonnes to their reserves, almost reaching the record buying levels seen in 2022. This ongoing demand, particularly from emerging economies, provides a solid foundation for gold prices. This situation creates a tension between a potentially hawkish Fed and steady buying from the official sector, suggesting significant volatility ahead. Traders might consider strategies that benefit from wide price swings, regardless of direction. A long straddle—buying both a call and a put option at the same strike price and expiration—could be an effective way to navigate the uncertainty surrounding the Fed’s next move. Create your live VT Markets account and start trading now.

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