Gold prices saw ups and downs, recovering some losses on Thursday after the Federal Reserve announced its policy. The XAU/USD rate was at $5,315, down 1.83% from a peak near $5,600. Market swings pushed Gold to a daily low of $5,098. Silver also dropped to $106.62 a troy ounce, while the Nasdaq, Bitcoin, and Ethereum also fell. Tensions between the US and Iran were rumored to be a factor in these changes. Despite this, Gold is up 23% for the year. President Trump will soon appoint a new Federal Reserve Chair. Meanwhile, US jobless claims rose, and the trade deficit expanded to $56 billion due to capital goods imports.

The Federal Reserve’s Policy Decision

The Federal Reserve decided to keep interest rates steady and stressed caution. There were no immediate changes. Last week’s data showed unemployment claims at 209,000 and Continuing Claims at 1.827 million. UBS increased its Gold price prediction to $6,200 a troy ounce for March to September, forecasting $5,900 by year-end. Currently, Gold has no clear direction but leans bullish, provided it closes above $5,415. The RSI indicates a balance between buyers and sellers. If Gold stays above $5,300, it could stabilize between $5,300 and $5,400. A rise above this range may lead to prices around $5,500 or higher. If it falls below $5,300, further declines could follow. Looking back to this time last year shows remarkable volatility. Gold hit a record high close to $5,600 an ounce before experiencing a significant pullback as many traders took profits after strong gains. At that time, traders expected major interest rate cuts from the Federal Reserve. The easing cycle we anticipated for early 2025 did occur, as the Federal Reserve began a series of rate cuts in the summer. This monetary easing was a key factor in helping Gold find a new, higher trading range in the second half of 2025. We’ve seen similar patterns in past rate-cut cycles, like in 2019 before a major gold rally.

Current Market Conditions

Entering February 2026 brings a more complicated situation. The latest Consumer Price Index (CPI) report for December 2025 showed inflation at 3.2%, still above the Fed’s 2% target. This ongoing inflation is raising questions about how many more rate cuts the central bank can afford this year. Against this backdrop, implied volatility in gold options remains high, indicating current uncertainty. Derivative traders might want to explore strategies that benefit from this volatility, such as selling covered calls on existing long positions to earn income while waiting for clearer trends. This tactic allows participation in potential gains while providing some protection against small price drops. Current speculative positioning is another important aspect to monitor closely. The latest Commitment of Traders report reveals that hedge funds and large speculators hold one of their biggest net-long positions in the past 24 months. While this shows strong bullish sentiment, it could also suggest that the market is becoming crowded, potentially leading to swift corrections if sentiment shifts. The US Dollar Index is currently holding steady around the 103.50 level, showing more strength than during last year’s peak. Meanwhile, the 10-year Treasury yield is above 4.1%, creating a significant challenge for non-yielding gold. Traders should look for significant breaks in either the dollar or yields as signals for gold’s next big move. Create your live VT Markets account and start trading now.

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