Gold prices climbed to about $4,195 in early Asian trading on Thursday, marking their highest point since October 21. This rise occurred just before the US House of Representatives voted on a Senate-approved bill aimed at ending the government shutdown, which would restore funding through January 30. The optimism surrounding a resolution to the US government shutdown is boosting Gold prices. This could lead to clearer economic signals and potentially a Federal Reserve interest rate cut. The CME FedWatch tool shows almost a 64% chance of a rate cut in December. Lower interest rates often make Gold more attractive because it does not pay interest.

Federal Reserve Policy Debate

Federal Reserve officials are divided on whether to change interest rates. Some worry about inflation, like Fed Governor Stephen Miran, who believes US monetary policy is too strict. On the other hand, Atlanta Fed President Raphael Bostic favors keeping rates steady until inflation declines to around 2%. Gold acts as a safe-haven investment and helps protect against inflation and falling currencies. Central banks, especially in emerging markets like China, India, and Turkey, added a record 1,136 tonnes of Gold to their reserves in 2022. Typically, Gold prices go up when the US Dollar weakens or when stock markets are under pressure. With Gold prices hitting around $4,195, the anticipated end of the US government shutdown is a significant factor. This resolution will lead to the release of more economic data, giving the Federal Reserve the insight it needs to make decisions. The focus today should be on comments from Fed officials to gauge any shifts in their stance. The market is increasingly anticipating a Fed rate cut in December, which is likely driving Gold’s recent gains. This expectation is supported by the October 2025 jobs report, which indicated a slowdown in hiring to just 130,000. This suggests the economy is cooling, prompting the Fed to ease its policy. Lower interest rates make holding Gold more appealing since there’s less opportunity cost.

Market Volatility and Strategy

However, we need to stay alert for market volatility since Fed officials do not all share the same views. The latest Consumer Price Index for October 2025 showed inflation at 2.8%, still above the Fed’s 2% target, which could strengthen the case for more cautious policymakers. Strong statements from the Fed could lead to a quick, although likely temporary, drop in Gold prices. Given this situation, we may consider buying call options or setting up bull call spreads on Gold futures to take advantage of the upward movement. These strategies allow us to benefit from a continued price rise while limiting potential losses if the Fed takes a more hawkish stance. The current environment appears favorable for further gains, possibly breaking above the $4,200 mark. The negative correlation with the US Dollar is also vital to our strategy. As hope for a rate cut increases, the Dollar is expected to weaken further, providing a boost for Gold. We might balance our long Gold positions with short positions in the US Dollar Index. Supporting this positive outlook is the consistent demand from central banks, which helps maintain a strong price foundation. After record purchases in 2022, recent data shows that central banks globally added another 250 tonnes in the third quarter of 2025. This ongoing buying from institutional players helps absorb any selling pressure and reinforces Gold’s status as a core reserve asset. Create your live VT Markets account and start trading now.

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