The price of gold (XAU/USD) recently hit a record high of $4,218, rising over 1.40% due to growing trade tensions and political uncertainty in the US. This year, gold has increased by more than 60%, driven by geopolitical conflicts, expectations of rate cuts from the Federal Reserve, central bank purchases, and strong inflows into ETFs. US Treasury Secretary Scott Bessent’s efforts to reduce trade tensions with China largely went unnoticed, as traders turned their attention to gold’s appeal as a safe-haven asset. Economic worries were highlighted in a Federal Reserve report indicating stagflation and high inflation, while the US government remains shut down now for 15 days.

Gold Prices and the US Dollar

Gold prices are supported by a weakening US dollar, with the Dollar Index dropping 0.28% to 98.75. Fed Chair Jerome Powell suggested interest rates might shift to a more neutral position as inflation pressures rise. Updates on consumer prices are expected soon, despite the ongoing government shutdown. Technically, gold remains strong, with the potential to test $4,300. Investors believe there is a 98% chance of a rate cut at the Federal Reserve’s upcoming meeting. Gold’s future price movements will depend on geopolitical events and US economic data. The strong upward trend in gold is driven by ongoing political issues, the government shutdown, and rising trade tensions. These factors are likely to persist, making a strong case for bullish trading strategies using derivatives. Traders may want to buy call options with strike prices at or above $4,300 to take advantage of this momentum. Recent data supports this positive outlook. The latest Commitment of Traders report from late October 2025 shows that money managers have increased their net long positions for the fifth week in a row. Additionally, gold-backed ETFs saw another $5 billion in inflows during the first two weeks of the month, indicating strong investor interest from both institutions and individuals.

Key Events to Watch

Key events to monitor include the CPI inflation report on October 24 and the Federal Reserve meeting on October 28-29. With the market anticipating a rate cut, any unexpectedly high inflation reading could heighten fears of stagflation, as noted in the Fed’s Beige Book. This scenario could further drive gold prices up. This environment has drawn parallels to the stagflation of the 1970s when precious metals experienced a historic bull market. For those looking to manage risk, a bull call spread could be appealing—buying a $4,250 call and selling a $4,350 call for November expiration could lower initial costs while still offering upside potential. While the outlook remains bright, it’s essential to keep an eye on key support levels in case of a temporary pullback. The range around $4,150 to $4,100 appears to be a strong support zone. Selling cash-secured puts with strike prices near these levels could allow for income generation while positioning to buy gold at a lower price. Create your live VT Markets account and start trading now.

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