Gold is staying steady within a tight range as traders look for clues about the Federal Reserve’s interest rate cuts. It has remained stable for three days, showing no clear signs of falling as it trades in a week-long range during the Asian session on Tuesday. Traders are being cautious and are holding off on decisions until after Wednesday’s FOMC meeting. They are especially interested in economic insights and comments from Fed Chair Jerome Powell, which could affect the US Dollar and the attractiveness of non-yielding assets like Gold. The expectation of an upcoming interest rate cut by the US central bank and speculation about further cuts in 2026 are limiting the Dollar’s recovery. Additionally, ongoing geopolitical tensions from the protracted Russia-Ukraine conflict may continue to boost Gold’s appeal as a safe-haven asset. As a result, traders prefer to wait for clearer signals before predicting any significant price drop for the XAU/USD pair.

Fed Rate Expectations Impact

Last Friday’s US PCE Price Index did not change expectations for a Fed rate cut. Traders believe there is over an 85% chance that the central bank will lower interest rates by 25 basis points at the upcoming meeting. Meanwhile, the yield on the 10-year US government bond rose to a two-and-a-half-month high on Monday. Speculation about comments from Fed Chair Jerome Powell might suggest a pause in rate cuts, which could create resistance for Gold in the Asian market. Investors are keenly watching US economic releases, as new data may influence the US Dollar and the XAU/USD pair. Gold has shown some strength below the 200-hour EMA since the start of the month. Daily chart indicators are positive, suggesting potential movement above the $4,200 mark, which would challenge resistance around $4,245-$4,250. Support lies near the $4,175-$4,174 range, and a drop below this level could lead Gold to test prices below $4,100. Historically, Gold has been a safe-haven asset and a means of exchange, especially during economic downturns. Central banks hold significant amounts of Gold to strengthen their economies and diversify reserves. In 2022, central banks added 1,136 tonnes of Gold, worth about $70 billion, to their reserves—the highest annual increase ever recorded. Countries like China, India, and Turkey are rapidly expanding their Gold reserves. Gold tends to move in the opposite direction of the US Dollar and US Treasuries. When the Dollar falls, Gold often rises, offering a way to diversify during market instability. Similarly, when traditional markets drop, Gold typically benefits due to its nature as a yield-less asset. Lower interest rates can boost Gold prices, while higher rates usually have the opposite effect. However, most price changes are driven by the behavior of the US Dollar since Gold is priced in dollars (XAU/USD). A strong Dollar can cap Gold prices, while a weak Dollar tends to raise them.

Awaiting Fed’s Decision

Currently, Gold is stuck in a narrow range as we await more clarity on the Federal Reserve’s interest rate plans. With the critical FOMC decision set for Wednesday, December 10, 2025, many traders are holding off on making moves. The market largely expects a rate cut, with the CME FedWatch Tool indicating a nearly 90% chance of a 25-basis-point reduction. This expectation for lower rates is supported by recent economic data showing that inflation is decreasing. For instance, the PCE Price Index for October 2025 showed a 2.9% annual rate, marking the fourth consecutive month below 3%. This trend keeps the US Dollar weak, creating a solid support base for non-yielding assets like Gold. We see similarities to the geopolitical uncertainties of the early 2020s—events like the Russia-Ukraine conflict enhanced Gold’s safe-haven status. Today, ongoing trade discussions and tensions in the South China Sea are creating a similar, though less intense, atmosphere of support. These factors contribute to a cautious market mood that favors Gold. Central bank demand remains a strong long-term driver for Gold. The record-setting purchase of 1,136 tonnes by central banks in 2022 shows persistent appetite. According to recent data from the World Gold Council, central banks have added over 900 tonnes to their reserves through the third quarter of 2025, with emerging economies leading the charge. For derivative traders, there’s an opportunity to play the expected volatility around Wednesday’s announcement rather than making a definitive directional bet beforehand. Buying options straddles or strangles that expire later this week could be a smart way to capitalize on sharp price movements in either direction. A dovish surprise could push us toward the top of the range near $4,250. However, be cautious of any hawkish comments from Fed Chair Jerome Powell during his press conference. If he suggests a higher standard for future rate cuts, Gold could quickly drop below its immediate support around the $4,174 area. A convincing move below the monthly low near $4,163 would make Gold vulnerable to a deeper decline toward the long-term support line below $4,100. Create your live VT Markets account and start trading now.

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