Gold (XAU/USD) is rising, currently trading around $4,365 after hitting a high of $4,380. Factors such as worries over a prolonged U.S. government shutdown, expectations for further U.S. interest rate cuts, and increasing U.S.-China trade tensions are driving the price of the metal up. The U.S. government shutdown, now in its third week, is impacting the U.S. Dollar, which supports gold prices. Treasury officials estimate the shutdown could cost the U.S. economy around $15 billion each week.

Federal Reserve Rate Cut Prospects

Expectations of U.S. Federal Reserve rate cuts are strengthening gold’s position. Fed Chair Jerome Powell has pointed out risks to the economy, suggesting possible rate cuts. Governor Waller also supports these reductions. As U.S.-China trade tensions rise, gold may benefit. However, easing geopolitical tensions could lessen gold’s appeal as a safe-haven asset. Gold is considered a safe-haven asset and a hedge against inflation, making it an attractive investment during uncertain times. Central banks, particularly from China, India, and Turkey, are significant buyers of gold, adding 1,136 tonnes to their reserves in 2022. Gold prices typically move in the opposite direction of the U.S. Dollar. When geopolitical instability rises or interest rates change, gold’s value is affected, with a stronger dollar likely pushing prices down.

Market Position and Strategy

As of October 17, 2025, gold has broken above $4,350, signaling a bullish market stance. Derivative traders are opting for long call options to capitalize on the upward trend. This strategy allows investors to join the rally while minimizing risk. The ongoing U.S. government shutdown is a major factor driving investment into safe-haven assets. This shutdown is already longer than the 16-day shutdown in 2013 and is raising concerns that it might approach the record 35-day shutdown from 2018-2019. The weakening U.S. Dollar is benefiting gold prices. Additionally, the market is pricing in more interest rate cuts from the Federal Reserve. Current data from the CME Group indicates a greater than 90% chance of at least two more rate cuts by year-end. This prospect lowers the opportunity cost of holding gold, making futures contracts and long positions more appealing. This ongoing rally has pushed up implied volatility in gold options, making outright call purchases quite expensive. Thus, a wise strategy would be to use bull call spreads. This approach helps reduce initial costs while still allowing for profit as gold prices continue to rise. Longer-term central bank accumulation trends support this strategy. The World Gold Council reported record purchases of 1,136 tonnes in 2022, a trend that continued through 2023 and 2024 as countries diversified away from the dollar. This ongoing institutional buying provides a solid support level for gold prices. Create your live VT Markets account and start trading now.

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