Gold’s Trajectory and Key Levels

Gold sees an upward movement as the US Dollar weakens, supported by renewed demand. As of Thursday’s European session, Gold rose above the $4,000 level amid concerns over a prolonged US government shutdown affecting the Dollar. However, factors like US-China trade optimism and the Federal Reserve’s hawkish stance curb aggressive investment in Gold.

The Fed signaled no further rate cuts in December, potentially limiting any further USD depreciation. This, along with trade optimism after discussions between US and Chinese leaders, restrains Gold’s upward momentum. Traders await speeches from key FOMC members for more direction on future rate cuts, impacting Gold’s trajectory.

Gold approaches the 100-hour Simple Moving Average near $4,016, a critical level to surpass for further gains. Failing to rise beyond the 23.6% Fibonacci retracement suggests potential selling near the $4,000 mark. Should Gold drop below $3,950, support levels exist near $3,917, potentially leading to further declines.

The Impact of the US Dollar

The US Dollar, the world’s most traded currency, impacts global exchange rates. Fed policies, including interest rates and quantitative measures, are vital in US Dollar valuation. Quantitative easing tends to weaken the Dollar, while tightening generally strengthens it.

Gold is again testing the crucial $4,000 level, and this pattern feels familiar to situations we’ve seen in the past. A slight pullback in the US Dollar is providing support, but the greenback remains strong overall. The Dollar Index (DXY) has been hovering near the 108 mark for weeks, capping any explosive moves higher for the metal.

Federal Reserve commentary continues to lean hawkish, especially with the September 2025 Consumer Price Index report showing inflation still running at a stubborn 3.9%. This reminds us of past cycles where the central bank pushed back against market hopes for easier policy. Consequently, traders are reducing bets on any interest rate cuts before the middle of next year.

However, there are growing signs of economic slowing that are creating safe-haven demand for gold. The last Non-Farm Payrolls report for September 2025 came in at a weaker-than-expected 175,000 jobs, raising concerns about the labor market. This uncertainty is what’s keeping gold bid, even in the face of a strong dollar.

Using Options Strategies

Given these conflicting signals, we see increased demand for options strategies that can profit from a spike in volatility. A long straddle using options with expirations in the coming weeks, centered around the $4,000 strike price, could be a way to trade the potential for a large move in either direction. This approach allows traders to capitalize on a breakout without having to correctly guess its direction.

For those leaning bearish due to the Fed’s stance, buying put options offers a position with defined risk. We believe looking at puts with strike prices near the $3,950 and $3,900 levels could provide protection or a way to speculate on a corrective slide. This strategy becomes particularly interesting if gold decisively fails to hold above the $4,000 mark.

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