Gold prices are under pressure due to hopes for a trade deal between the US and China. On Monday, the precious metal fell nearly 2%, approaching the $4,000 support level. US President Donald Trump’s remarks about a potential trade agreement have reduced concerns about additional trade restrictions, affecting global market sentiment.

Technical Perspective On Gold

Technically, gold is currently in a bearish correction phase, having fallen from its all-time high of around $4,400. Prices are below the previous support level of $4,185, which strengthens the bearish trend. Immediate support is at the $4,000 level, a key psychological threshold that has held since October 22. Should prices fall below this, the lows from October 9 and 10 at $3,945, along with the 61.8% Fibonacci retracement level, are important areas to watch for potential rebounds. Gold tends to move in the opposite direction of the US Dollar and US Treasuries, typically rising when the Dollar falls. Increased geopolitical tensions and fears of a recession lead to higher demand for gold, as it is viewed as a safe haven. In 2022, central banks were the largest buyers of gold, adding 1,136 tonnes valued at around $70 billion to their reserves, the highest annual purchase ever. Emerging markets are quickly increasing their gold holdings as well. Due to gold’s current situation, we are closely monitoring the $4,000 level. With a growing appetite for risk, as evidenced by the S&P 500 having its best week of the quarter and strong corporate earnings for Q3, capital is moving away from safe-haven assets like gold. Recent data supports the bearish outlook. The World Gold Council’s report for Q3 2025 indicated that central bank gold purchases dropped to just 180 tonnes, the lowest quarterly amount since early 2023. This contrasts sharply with the record buying seen in 2022 and reduces a key support for prices. For traders expecting a drop below the $4,000 psychological support, buying put options is a straightforward approach. Targeting strike prices around $3,945 could be effective, aligning with earlier October lows. Expirations in late November or early December would provide ample time for this trade to develop.

Considerations For Traders

It’s important to consider the Federal Reserve’s changing stance on interest rates. The latest inflation report showed core CPI falling to an 18-month low of 3.1%. As a result, the CME FedWatch tool indicates a 45% chance of a rate cut in Q1 2026. If the Fed signals more dovish policies, gold prices could stabilize, since lower rates decrease the cost of holding non-yielding assets like gold. To navigate this uncertainty, a bear put spread may be a more cautious strategy. This involves buying a put option at a strike like $3,950 while selling another at a lower strike, such as $3,850. This approach limits potential profits but significantly reduces initial costs and risks if prices move unexpectedly. The Gold Volatility Index (GVZ) has recently fallen to a three-month low of 15.2, making options cheaper right now. This situation provides a chance to establish positions at a lower cost before a possible breakdown or market reversal. It’s an opportune moment to create trades that could benefit from a steady decline toward the next support levels. Create your live VT Markets account and start trading now.

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