Gold prices have fallen to about $4,245 in early Asian trading on Monday. The decrease comes as demand drops after the festive season and the gold rally loses momentum. Traders are now focusing on the upcoming China Q3 GDP data and other economic indicators.

Festive Demand and Geopolitical Tensions

Last week was a good one for gold, thanks to festive demand in India and large ETF purchases. However, some market corrections may happen as prices stabilize. Current geopolitical risks, especially the US-China trade tensions, might lead more investors to seek safe-haven assets like gold. Central banks hold huge gold reserves to strengthen their currencies during uncertain times. In 2022, they acquired a record 1,136 tonnes of gold, worth around $70 billion. Countries like China, India, and Turkey are notably increasing their gold reserves. Gold prices usually move in the opposite direction of the US Dollar and risk assets. Economic or geopolitical instability can lead to higher gold prices because it is seen as a safe place to invest. The strength of the US Dollar and changes in interest rates greatly affect gold’s market value since it is priced in USD. As gold drops to around $4,245, it seems to be taking a short break after a significant rise. This decline is likely due to profit-taking and temporarily lower physical demand now that the key festive season has ended. The market appears to be pausing before making its next big move.

Gold Trading Strategies

In the upcoming weeks, the consolidation around the $4,250 level offers a chance to use options for income generation. Selling out-of-the-money call options could be a smart strategy to earn premiums while the price remains stable. This tactic assumes that the recent rally may be overextended in the short term. Recent economic data makes simple bets on gold’s direction risky. China’s Q3 GDP, released on October 19, 2025, was reported at 4.4%, just below the expected 4.6%, raising concerns about global growth. This came after last week’s US Consumer Price Index (CPI) for September, which held steady at 3.8%, putting pressure on central banks. Gold’s underlying strength comes from ongoing geopolitical and economic uncertainties. The persistent US-China trade tensions over rare earth minerals and the recent downgrade of France’s credit by S&P Global remind us that demand for safe havens can rise quickly. We saw similar trends in the early 2020s, where geopolitical crises led to sharp gold price rallies after periods of consolidation. Thus, traders may see this price drop as a chance to set up longer-term bullish positions with managed risk. Buying long-dated call options or using bull call spreads could enable participation in potential price increases if safe-haven demand spikes again. This strategy also limits downside risk if the price stays stable or drops a bit more over the next few weeks. Monitoring the US Dollar’s performance is vital. The US Dollar Index (DXY) is currently around 107, and any signs of weakness could trigger gold to break out of its current range. Central bank buying continues to support prices, with World Gold Council data showing robust net purchases of 284 tonnes in Q3 2025. Create your live VT Markets account and start trading now.

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