Gold prices in India went up on Monday. According to FXStreet, the price per gram rose to 11,573.69 Indian Rupees from 11,463.25 on Friday. The price per tola also increased, reaching 134,993.60 INR, up from 133,705.10 INR. Global tensions have risen after the US President hinted at possible tariffs on Chinese exports. This uncertainty has affected Gold prices. Additionally, the government shutdown in the US is now in its third week, impacting market conditions further.

Interest Rates and Gold

The likelihood of interest rate cuts by the Federal Reserve is high, with a 96% chance for October and 87% for December. This situation benefits Gold, which does not yield interest. Despite global events, FXStreet notes that Gold prices in India reflect overall market trends but may vary slightly locally. Gold’s price tends to rise when the US Dollar and treasuries fall. This means that, as a safe investment during uncertain times, Gold becomes more appealing when interest rates are low and the dollar weakens. With Gold reaching a new all-time high, investors are clearly seeking safety. This surge is driven by heightened geopolitical tensions between the US and China, the ongoing war in Ukraine, and instability from the US government shutdown. These factors create significant uncertainty, positioning Gold as the go-to safe asset for now.

Investment Strategies for Traders

The strong chances of Federal Reserve rate cuts in October and December are boosting Gold prices. A similar trend happened in 2019 when the Fed cut rates, causing Gold to rise over 15% in just three months. With the CME FedWatch tool indicating a 96% chance of a rate cut this month, Gold’s path seems to be upward, especially as a weaker dollar makes it more attractive. For derivative traders, the current environment favors bullish strategies on Gold in the coming weeks. Consider buying call options or setting up bull call spreads on gold futures or ETFs like GLD to take advantage of expected price increases with controlled risk. The rising global uncertainty is also increasing implied volatility, which raises option premiums but reflects the real market risks. The US dollar is weakening due to the potential government shutdown, which the Congressional Budget Office estimated cost the economy billions in 2019. This domestic weakness, along with the possibility of lower interest rates, strengthens the inverse relationship with Gold. Thus, long Gold and short US dollar positions could be wise to fully benefit from these market changes. With multiple factors at play, any decreases in Gold prices should be seen as buying opportunities. We can use strategies like selling cash-secured puts at strike prices that we are comfortable with for Gold, allowing us to collect premiums while awaiting possible entry points. However, the main focus should remain on long positions as long as geopolitical and monetary pressures continue. Create your live VT Markets account and start trading now.

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