Market Outlook

Gold has seen a slight increase, but it is still below its highest point as traders take a pause due to overbought conditions. The situation remains favorable for gold due to ongoing geopolitical tensions and a partial shutdown of the US government, which are boosting demand for the precious metal. With uncertainty still in the air, investors are favoring gold. Its value has gone up by 45% since 2025 and 11% just in September. If the Republican spending bill fails, it might bring more government shutdowns, which could further increase gold’s appeal and push the Federal Reserve towards easing monetary policy. Traders believe there is a 95% chance of a rate cut during the October Federal Reserve meeting and a 75% chance of another cut in December. While Dallas Fed President Logan warned about inflation, geopolitical issues—like Russia’s position on US missile supplies to Ukraine—continue to support gold prices. Technically, gold prices are looking positive, even though the RSI shows overbought conditions. If gold dips below $3,835, there could be buying support, but a drop below $3,800 might lead to bigger losses. The Federal Reserve’s monetary policy, including rate changes, significantly affects the US dollar. Quantitative easing and tightening are used at specific economic times to influence the dollar’s strength.

Gold Price Dynamics

Given gold’s extremely overbought status, the current pause below its all-time high should be seen as a healthy consolidation period rather than a decline. The underlying factors, driven by global risks and the US government shutdown, are very supportive for gold. Any pullback towards support levels should be viewed as a chance to buy, as the upward trend is still in place. The ongoing partial US government shutdown, which began in October 2025, is a strong boost for safe-haven investments. During the last significant 35-day shutdown starting in late 2018, gold prices rose over 4% due to the political instability. A similar move to safety might happen now, potentially driving prices higher. Market confidence in a shift from the Federal Reserve is very strong, with Fed fund futures indicating a 95% probability of a rate cut this month. This confidence remains robust even with core inflation around 3.2% as of August 2025. This reflects the sentiment from late 2023 when expectations for 2024 rate cuts spurred a major rally in gold prices. For derivative traders, a “buy the dip” strategy using options makes sense. Instead of chasing peaks, consider selling out-of-the-money put options with strike prices close to key support levels like $3,800 or $3,750 for November expiration. This strategy allows you to earn premiums while waiting for a better buying opportunity. Futures traders should monitor the $3,816 to $3,835 range closely, as this trend-line serves as significant initial support. Buying new long positions on a dip in this zone could offer a favorable risk-reward situation. However, if prices break below the $3,800 support level, it may be wise to adopt a temporary defensive approach. The positive outlook is further supported by the latest positioning of large investors. The recent Commitment of Traders (CFTC) report from late September 2025 revealed that money managers have increased their net-long positions in gold futures to the highest point in over two years. This indicates that major speculators believe gold still has room for growth. Create your live VT Markets account and start trading now.

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