Gold prices remained steady above $4,000, reaching a record high of $4,059. This increase was fueled by expectations of a dovish Federal Reserve and the ongoing US government shutdown, which has increased demand for safe-haven assets. As of now, Gold is trading around $4,025, down almost 0.50% from yesterday. This rise in Gold aligns with global market trends, where US equities, Bitcoin, and the US Dollar are also gaining.

Bullion Outlook and Market Trends

The outlook for bullion is encouraging, even though some pullbacks might attract buyers looking for lower prices. Anticipation of further Federal Reserve interest rate cuts this year is boosting Gold, especially as Treasury yields remain under pressure. Geopolitical and fiscal uncertainties, such as the long-lasting US government shutdown and political shifts in Europe and Japan, continue to drive safe-haven demand. A recent US-brokered peace plan for Gaza has eased some tensions, but many uncertainties remain. The US government shutdown, now in its ninth day, is causing market instability and slowing economic activity. Interruptions in economic data releases complicate the Federal Reserve’s decisions. Gold’s trend is still strong, with key support levels at $4,000 and various moving averages offering additional backing. Central banks are also increasing their Gold reserves due to its inverse relationship with the US Dollar and Treasuries.

Market Strategy Amid Uncertainty

In the current market, we see Gold’s main trend as clearly bullish, backed by expectations of Federal Reserve rate cuts and strong safe-haven demand from the government shutdown. Although momentum seems high after hitting $4,059, the fundamentals still support further gains. Our strategy should focus on riding the upward trend while being cautious of possible short-term pullbacks or consolidations. To understand the Fed’s dovish position, recall that the last Core PCE inflation report for August 2025 showed a decrease to 2.8%, close to the central bank’s target. Additionally, the most recent jobs report indicated that nonfarm payroll growth had slowed for the third straight month, adding only 95,000 jobs. These numbers support officials like New York Fed President John Williams, who advocate for more rate cuts to help the softening labor market. Given the high RSI readings, we should avoid pursuing leveraged futures positions at these record highs. Instead, a smarter approach is to buy call options during price dips toward the key psychological level of $4,000 or the 21-period SMA support around $3,992. This way, we can gain potential upside while clearly defining our maximum risk based on the premium paid. We’ve seen similar situations before, especially during the early stages of the Russia-Ukraine conflict in 2022 and the expansive monetary policy period of 2020, where geopolitical fears and dovish central banks created a favorable environment for gold. Historically, buying on dips has been more rewarding than selling during strong markets. This trend strengthens our belief that the current uptrend still has room to grow once any short-term exhaustion is resolved. Since market uncertainty has likely raised implied volatility, making call options pricier, we could consider using bull call spreads. By buying one call option and selling a higher-strike call, we can cut the net cost of our position. This strategy helps us take advantage of a bullish outlook while minimizing the effects of high premiums. The government shutdown adds uncertainty, primarily by delaying key economic data like the upcoming CPI report. This lack of clarity makes the Fed’s decision-making more challenging but also supports the safe-haven narrative, providing a cushion for gold prices. We should be alert for any signs of a political breakthrough on a funding bill, as a resolution could lead to a quick, likely temporary, drop in gold prices. Lastly, a swift resolution to geopolitical tensions, such as a lasting ceasefire in Gaza or an unexpected end to the government shutdown, could cause a sharp reversal in gold prices. To guard against such a “risk-on” event, we should think about holding a small number of out-of-the-money put options. This acts as a cost-effective insurance policy to protect our portfolio from a sudden drop in safe-haven demand. Create your live VT Markets account and start trading now.

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