Gold prices rose by over 0.10% following the latest US inflation report, which indicated a price increase but remained insufficient to prevent the Federal Reserve from cutting rates. XAU/USD rebounded from daily lows to trade at $4,127, driven by a softer Consumer Price Index report aligning with expectations.

Interest rates are expected to be cut at the upcoming Fed meeting, with a 96% probability. In related developments, the US and China are set for talks amid looming tariff deadlines, leading to fluctuations in gold demand. Gold has increased 55% this year, driven by trade tensions and central bank purchases.

Gold And Economic Indicators

The US Dollar Index rose by 0.03% to 98.94, while US Treasury yields edged down. Inflation for September was 3%, slightly below forecasts. Business activity in the US accelerated in October, but consumer sentiment dipped. JPMorgan anticipates gold could average $5,055/troy oz by Q4 2026 due to sustained demand.

Gold maintained its uptrend despite minor setbacks. Bullish momentum remains, with key resistance levels at $4,161 and $4,200. The precious metal serves dual purposes: as a store of value and a safe-haven investment during instability. Central banks added a record 1,136 tonnes in 2022, reinforcing gold reserves amid economic uncertainties.

With the Federal Reserve almost certain to cut rates next week, we should position for continued upward momentum in gold. The 96% probability priced in for the October 29th meeting is a powerful signal for traders. This suggests that buying call options or establishing bullish call spreads could be a prudent way to capture potential gains.

The softer-than-expected September CPI reading is the direct catalyst, pushing real yields lower and increasing gold’s appeal. The decline in the 10-year real yield to 1.689% is a significant tailwind for a non-yielding asset like gold. Looking back at the Fed’s easing cycle in 2019, we saw a similar pattern where falling real yields preceded a substantial rally in bullion prices.

Upcoming geopolitical events, including the Trump-Xi meeting and ongoing sanctions against Russia, are adding a layer of uncertainty that supports gold as a safe-haven asset. This environment may increase price swings, making options strategies that benefit from rising volatility attractive. The Gold Volatility Index (GVZ) has ticked up to 19.2 this month, reflecting market anxiety, but it remains below the highs we saw during the banking stress in early 2024.

Central Bank Demand And Technical Outlook

We must not ignore the powerful underlying demand from central banks, which has been a consistent theme since their record-breaking purchases in 2022. The latest World Gold Council data for Q3 2025 confirmed this trend, showing that central banks added another 295 tonnes to global reserves. This steady buying provides a strong floor for prices and reinforces the long-term bullish case.

From a technical standpoint, the key level to watch is the October 22 high of $4,161. A decisive break above this resistance could trigger a rapid move toward the $4,200 psychological level. Therefore, we should consider December call options with a $4,200 strike price to capitalize on a potential breakout.

The conflicting economic data, with strong business activity but deteriorating consumer sentiment, creates a confusing picture for the broader economy. The gap between the S&P Global PMI at a three-month high and the University of Michigan sentiment falling to 53.6 is notable. This divergence often precedes periods of volatility, which typically benefits safe-haven assets like gold.

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