Gold (XAU/USD) has stabilized above $4,100, showing a positive trend even though it’s below its recent peak. President Trump’s change in stance on China tariffs has boosted market optimism, while the US Dollar (USD) has gained for two consecutive days. The expected interest rate cuts by the US Federal Reserve in 2025 could further support gold prices. Additionally, a possible prolonged government shutdown in the US may pose economic risks that could benefit gold. Geopolitical issues are also impacting gold prices. Renewed tensions in US-China trade and the ongoing Russia-Ukraine conflict are pushing gold higher. Trump’s softer tone on China helps ease trade war concerns but does not hinder gold’s upward momentum. Traders believe there’s a high chance that the Federal Reserve will cut rates further, making gold more appealing. Despite the USD’s strength, gold’s positive outlook remains intact.

Technical Indicators And Market Movements

Technical indicators show that gold is on an upward path, supported by a multi-week trend-line. Breaking through the $4,055-$4,060 resistance level indicates a short-term positive outlook. However, caution is advised because the RSI is currently overbought. If gold pulls back, it could present good buying opportunities. But if it drops below $4,060, it might decline toward $4,000. The USD shows gains against major currencies, especially the Australian Dollar. Since gold is close to its all-time high, we need to watch for mixed signals. The main factor remains the Federal Reserve. Data from the CME FedWatch Tool suggests a 98% chance of a 25-basis-point rate cut during the October 29th meeting. This expectation of cheaper borrowing makes holding non-yielding gold very attractive in the weeks to come. The ongoing US government shutdown, now in its third week, strongly supports safe-haven assets like gold. The Congressional Budget Office recently estimated that the shutdown is reducing Q4 GDP growth by 0.2% for each week it continues, increasing economic uncertainty. This situation provides a solid support level for gold prices, similar to what we saw during the lengthy shutdown in late 2018, which led to a six-month gold rally.

Inflation Data And Institutional Demand

The Federal Reserve’s cautious approach is supported by recent inflation data. The latest September CPI report showed year-over-year inflation cooling to 2.8%. Additionally, the World Gold Council reported that central banks bought a net 250 tonnes of gold in Q3 2025, marking the fifth quarter in a row of strong institutional demand. These factors suggest that the current high gold price is backed by more than just short-term geopolitical events. In the derivatives market, this bullish sentiment is reflected in the options market. Open interest for call options on December gold futures with strike prices of $4,200 and $4,250 has surged over 40% in the past week. However, we should stay cautious because the daily Relative Strength Index (RSI) is above 80, which indicates it may be overbought and could experience a sharp pullback. Our strategy should focus on buying any dips in price rather than chasing the rally at these high levels. We can look back at the price movements in 2023 when gold corrected after reaching new highs before continuing its upward trend. A disciplined approach would be to view any retracement toward the $4,060-$4,055 support zone as a good entry point for long positions. Create your live VT Markets account and start trading now.

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