Insights 
VT 
Gold’s price decreased by 0.63% during the North American session on Tuesday, trading at $3,955 after hitting three-week lows below $3,900. The decline is attributed to reduced safe-haven demand amid hopes of de-escalation in the US-China trade tensions, following discussions between senior officials.
The Middle East situation could limit Gold losses, as the Jerusalem Post speculated on potential military responses to current Hamas violations. If conflicts resume, Gold might recover recent losses, aiming to reach $4,000. A Federal Reserve meeting is expected with a potential rate cut of 25 basis points, possibly influencing Gold prices.
Gold has gained 51% this year, supported by geopolitical and trade tensions and lower US interest rates. The US Dollar Index slightly decreased, while US 10-year Treasury yields remained unchanged. Gold may benefit if central banks increase purchases, such as South Korea’s potential reserve addition.
Broader Gold Trends Remain
The broader Gold uptrend persists despite dropping below $3,900, with a three-week low. If Gold closes below $4,000, prices might fluctuate between $3,900 and $4,000. Failed support could target October lows at $3,886, with the next corrective zone near $3,779. Conversely, breaking $4,000 could see resistance at $4,100 and $4,161.
The recent dip in gold to $3,955 reflects a slight shift towards riskier assets, as we see renewed optimism over global supply chain resolutions. This pullback sent the price briefly below the $3,900 mark, testing three-week lows before finding some support. For now, this suggests that any positive economic news is causing traders to take profits on gold’s impressive run.
While the old US-China trade war of the late 2010s is behind us, new tensions around semiconductor access and naval presence in the South China Sea are providing a floor for the metal’s price. Separately, any escalation of the current drone activity near the Strait of Hormuz could easily reignite safe-haven buying. We believe these geopolitical undercurrents will likely limit any significant downside for gold in the near term.
The Federal Reserve’s Role
The Federal Reserve’s next move is critical, and we are now seeing markets price in a potential rate cut in the first quarter of 2026, a shift from previous expectations of a prolonged hold. With the latest CPI report showing inflation has cooled to 3.1%, the Fed has more room to pivot if economic growth continues to slow. This expectation of lower future rates is a key long-term support for a non-yielding asset like gold.
We must also consider the relentless demand from central banks, a trend that has accelerated significantly since the record-breaking purchases we saw back in 2022. Data from the first half of 2025 confirms that emerging market banks, particularly in Asia, continue to diversify their reserves, adding hundreds of tonnes and putting a steady bid under the market. This structural buying provides a strong safety net against sharp sell-offs.
Given the conflicting signals, derivative traders might consider strategies that benefit from range-bound price action in the coming weeks. With the price hovering below the key psychological level of $4,000, selling covered calls with a strike price at or above $4,100 could generate income while we wait for a clearer trend. Alternatively, buying put spreads below $3,900 offers a cheap way to hedge against a potential breakdown toward the 50-day moving average, which currently sits near $3,779.
The US Dollar Index’s recent stability around the 104 level has acted as a headwind, preventing a more aggressive rally in gold. We are also watching the 10-year Treasury yield, which at 4.2% is keeping the opportunity cost of holding gold relatively high. A decisive break below 4.0% in the 10-year yield would likely be the catalyst needed for gold to make a sustainable move back above $4,000 per ounce.
