Gold prices have climbed to $3,970 as investors look for safe assets during a downturn in global stock markets. This rise follows a dip to $3,930, with gold staying within its usual trading range for the past two weeks.

Geopolitical and Economic Factors

Recent falls in stock markets, particularly major Wall Street indices, have increased the demand for safe-haven assets. Concerns about an AI bubble and geopolitical issues are driving this demand. However, gold’s recovery is somewhat limited by the Federal Reserve’s strict policies and ongoing discussions among policymakers. The US government shutdown, now into its fifth week, adds to market uncertainty by delaying critical monetary policy data. Important economic reports, such as the ADP Employment Change and the ISM Services PMI, are expected to show slight improvements, with private payrolls predicted to rise by 25,000 in October. Gold is seen as a reliable store of value and a safe asset, making it a favorite among central banks looking to diversify their reserves. In 2022, central banks, especially in China, India, and Turkey, purchased a record 1,136 tonnes of gold. Gold prices typically move in the opposite direction of the US Dollar and other risk assets, often increasing during times of geopolitical tension and when interest rates are low. With global stock markets falling, it’s clear that more people are turning to gold for safety. The Nasdaq Composite has dropped nearly 8% over the past two weeks, raising worries about a possible AI bubble burst and pushing investors towards more tangible assets. This trend indicates that any further stock market weakness could lead to increased buying in gold futures and call options.

Monetary Policy Constraints

However, we need to stay attentive to the Federal Reserve, as their strict policy approach is limiting gold’s potential growth. The chances of a rate cut in December have decreased from over 70% last month to below 40% this week, which is keeping the US Dollar and Treasury yields strong. This balance means gold might stay within a specific range, which could make strategies that take advantage of sideways movement, such as selling strangles, appealing. The ongoing government shutdown adds more uncertainty, as it removes essential economic data from both us and the Fed. We experienced a similar situation during the 35-day shutdown in late 2018 and early 2019 when gold prices rose as the Fed became more cautious. If this shutdown continues, it might weaken the Fed’s strict stance and provide strong support for gold. Gold prices are also supported by ongoing acquisitions from central banks, which are creating a solid foundation for the market. According to the latest data from the World Gold Council for Q3 2025, central banks added another 280 tonnes to their reserves, highlighting a strong institutional belief in gold’s lasting value. This suggests that buying during price dips could be an effective strategy for long-term investors. Given these mixed signals, we can expect higher implied volatility in gold options in the coming weeks. Traders should brace for significant price movements once key reports, like today’s ADP report, are released. A market that lacks information is likely to react strongly. This situation can be ideal for defined-risk option strategies that benefit from substantial price shifts in either direction. Create your live VT Markets account and start trading now.

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