Insights 
VT 
Gold edged higher as traders repositioned ahead of the Federal Reserve’s interest rate decision. The market anticipates a second 25-basis-point rate cut, shifting the target range to 3.75%-4.00%.
The modest recovery largely countered recent losses that saw gold drop close to the $3,886 mark. At the time of writing, it traded around $3,995, marking a near 1.0% increase after a three-day decline.
Optimism Toward Us China Trade Talks
Optimism regarding US-China trade talks initially dampened gold demand. Gold dropped nearly 10% from last week’s high of $4,381 before stabilising near $3,900.
With the Fed’s policy announcement imminent, traders are keenly observing for indications of further measures. A longer easing cycle may boost gold, whilst cautionary tones could limit gains.
US Dollar and Treasury yields presented a mixed performance ahead of the Fed’s decision. The Dollar Index declined from an intraday peak to 98.71, and Treasury yields slightly increased.
Official data remains sparse due to the US government shutdown. However, ADP’s preliminary employment estimates showed private sector growth, hinting at ongoing economic adjustments.
Looking forward, the market’s focus will also include discussions between President Trump and President Xi at the APEC Summit. The gold price direction may shift depending on outcomes from these geopolitical developments.
Approaching The Federal Reserve Decision
As we approach the Federal Reserve’s decision next week, we are seeing a familiar setup to what occurred years ago. Back then, markets were pricing in a second rate cut to bring the target range down toward 4.00%, a level considered accommodative at the time. Today, on October 29, 2025, the situation is different, with the Fed holding rates in a restrictive 4.50%-4.75% range for the past five months to ensure inflation is controlled.
Derivative traders are now positioning for a potential dovish pivot from the central bank, but the timing is uncertain. The CME FedWatch Tool currently shows only a 22% probability of a rate cut at the December 2025 meeting, though this has crept up from 15% last week. This suggests options markets are beginning to price in a higher likelihood of easing in early 2026.
Recent economic data gives some credibility to this view, creating an environment where gold could perform well. The last Consumer Price Index report for September 2025 showed headline inflation cooled to 2.8% year-over-year, and the latest jobs report revealed that hiring slowed more than expected, with only 160,000 jobs added. This dual trend of softening inflation and a cooling labor market puts pressure on the Fed to consider easing policy sooner rather than later.
For those trading gold derivatives, this means implied volatility is starting to rise. The CBOE Gold Volatility Index (GVZ) has ticked up to 18.5, reflecting the growing uncertainty around the Fed’s next move. This makes long-dated call options an interesting strategy for traders who believe the central bank will be forced to cut rates by the first quarter of next year.
The geopolitical landscape also offers a contrast to the past focus on a single US-China trade deal. While tensions with China remain a background factor, the market is more concerned with broader supply chain realignments and simmering conflicts in other regions. This provides a more sustained, low-level bid for safe-haven assets like gold, unlike the sharp risk-on, risk-off moves we saw during the Trump-Xi meetings.
Looking back, we remember that the easing cycle of late 2019 was a precursor to the massive monetary stimulus that followed in 2020, which sent gold to new highs. History reminds us that the beginning of a sustained Fed cutting cycle can mark a major long-term entry point for gold bulls. Therefore, any signals from the upcoming Fed statement hinting at an end to the current tightening bias will be watched extremely closely.
