Gold prices remain hindered below the $4,045 resistance level, despite attempts to recover from lows under $3,900. The US Dollar’s strength, fuelled by the Fed’s monetary actions, impacts the precious metal’s recovery, leaving the $3,900 support vulnerable.

In a broader view, gold struggles as the US Dollar recovers from past losses, underpinned by the Fed’s policy stance. The central bank’s rate cuts last week, coupled with Chairman Powell’s caution against anticipated monetary easing, propelled US treasury yields and the Dollar upward.

Mixed Technical Outlook

Technical analysis reveals a mixed outlook, with the 4-hour RSI around 50, indicating a stagnant market. Bulls’ inability to surpass resistance between $4,030 and $4,045 exposes the $3,900 support level.

Surpassing $4,045 could reduce bearish pressure and draw focus to the $4,150 area. A further decline below $3,890 may shift attention towards the October 2 low near $3,820.

Gold serves as a safe-haven and inflation hedge, with central banks as the largest buyers, aiming to strengthen economic perceptions. Gold inversely correlates with the USD and Treasuries, rising with lower interest rates and geopolitical instability, while higher rates tend to suppress its value.

With gold fluctuating around the $4,000 mark, the immediate outlook is neutral. The market is caught between a key resistance level at $4,045 and solid support near $3,900. This tight range suggests option traders could consider strategies that profit from low volatility, but they must be prepared for a breakout.

Influence of the US Dollar

The primary headwind for gold is the strong US Dollar, driven by the Federal Reserve’s recent hawkish tone. Looking back, we saw a similar pattern in late 2023 when the Fed signaled higher-for-longer rates, which capped gold’s upside. With the latest October inflation figures coming in stubbornly high at 3.8%, Chairman Powell’s warning against expecting another rate cut in December carries significant weight.

Adding to the pressure, US 10-year Treasury yields are holding firm at 4.9%, making non-yielding gold less attractive for investors. Today’s stronger-than-expected manufacturing data further reinforces the case for a robust economy, which could delay future Fed easing. These factors suggest that any move toward the $4,045 resistance level may face significant selling pressure.

For traders looking to capitalize on this indecision, selling options strangles with strike prices outside the $3,900-$4,045 range could be a viable short-term play. The neutral reading on the Relative Strength Index supports this view of a temporarily stalled market. However, stops should be placed just beyond these key levels to protect against a sudden directional move.

A bearish strategy would involve waiting for a decisive break below the $3,890 support level. A confirmed move below this point could trigger further selling, opening the door for short futures positions or the purchase of put options. The initial target for such a trade would be the support area around $3,820.

Conversely, a bullish stance requires patience and a clear signal that dollar strength is fading. A sustained move above $4,045 would be the first sign that bearish pressure is easing, presenting an opportunity to buy call options. The first significant target on the upside would be the $4,150 resistance zone.

Despite these short-term headwinds, we should not ignore the strong underlying support for gold. World Gold Council data for the third quarter of 2025 shows that central banks, particularly from emerging economies, continued their aggressive buying spree. This persistent demand provides a long-term floor for the price, cautioning against overly bearish positions.

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