Insights 
VT 
Gold Faces Resistance Despite Safe-Haven Buying
The US Federal Reserve’s hawkish stance allowed the US Dollar to strengthen, hindering bullish bets on gold. This, coupled with the underlying positive tone in equity markets, may cap gold’s upward movement. The gold price must overcome the $4,045-4,050 resistance for a sustained recovery beyond last week’s lows.
US President Trump mentioned Nvidia’s AI chip would be restricted to others, countering some optimism from reduced US-China trade tensions and supporting gold. The US government shutdown continued, raising concerns about potential economic damage, which also boosted gold’s safe-haven demand.
The Fed recently cut rates by 25 basis points but hinted against further cuts soon, maintaining the US Dollar’s strength. Traders are focused on upcoming US economic data and speeches from key Federal Reserve members for new market impacts. This could determine the direction of gold prices relative to pivotal resistance levels.
Gold appears to be facing resistance, struggling to push higher despite some intraday safe-haven buying. The ongoing tensions regarding US restrictions on AI hardware flowing to China are a familiar theme, providing a consistent, modest lift to the precious metal. This geopolitical friction remains a key factor we believe will continue to support gold prices on any significant dips.
The US Dollar remains strong, buoyed by the Federal Reserve’s persistently hawkish stance. Looking back at the data, we saw the Fed hold rates steady through much of 2024 and 2025, a decision that has kept the Dollar attractive and capped gold’s upside. This strength in the USD is a primary headwind, making it expensive for traders to place aggressive bullish bets on non-yielding assets like gold in the coming weeks.
Signs of Economic Strain Could Complicate the Fed’s Position
However, we are also watching signs of economic strain in the US, which could complicate the Fed’s position. The ISM Manufacturing PMI has been showing weakness for months, with data from late 2024 consistently pointing to a contraction in the manufacturing sector. These underlying economic risks, similar to concerns we saw during past government shutdown threats, add to gold’s appeal as a store of value.
A powerful underlying support for gold has been the relentless buying from central banks. We saw this trend accelerate sharply in 2023 and 2024, with central banks adding hundreds of tonnes to their reserves to diversify away from the dollar. This institutional demand creates a strong price floor and suggests that any significant drop in gold’s price will be met with major buyers.
For derivative traders, this environment points towards elevated volatility rather than a clear directional trend. The conflict between a strong dollar and strong safe-haven demand suggests a choppy, range-bound market is likely for the next several weeks. Strategies that benefit from this volatility, such as purchasing straddles or strangles, could be more effective than waiting for a definitive breakout.
