Gold Stabilizes As US Dollar Weakens Gold’s short-term outlook looks slightly bearish as markets adjust to recent changes, but the long-term view remains positive. Risks are limited by expected dovish actions from the Federal Reserve, the ongoing US government shutdown, and persistent geopolitical uncertainties. Recently, President Trump mentioned a potential meeting with Chinese President Xi Jinping in South Korea, leaving markets in a state of uncertainty. High-level trade talks between US and Chinese officials are aimed at avoiding tariff increases before November 10. The US government shutdown is now in its twenty-second day, marking the second-longest in history, with funding talks still stalled. In Europe, there are plans for a peace proposal regarding the conflict with Russia. Key economic data coming this week includes the Consumer Price Index (CPI) and preliminary Purchasing Managers’ Index (PMI) readings, with a rate cut expected soon. **Short-Term Strategies And Market Uncertainty** Following the sharp decline from recent highs, we see a short-term bearish trend, further confirmed by breaking below the $4,200 mark. We should consider strategies that can take advantage of further price drops or consolidation in the coming days. Buying put options with a strike price close to $4,000 would be a direct way to profit if gold continues to slide toward the $3,950 support zone. However, big risks from the US-China trade talks and the upcoming Federal Reserve meeting mean we can expect volatility. Any sudden breakdown in negotiations could send gold prices soaring again. Thus, preparing for sharp moves in either direction is essential. A long straddle—buying both a call and a put option at the same strike price and expiration—can help us profit from significant price swings, no matter which way they go. The fundamental outlook remains supportive, especially as the US government shutdown stretches to 22 days, nearing the record 35-day shutdown of 2018-2019. We also recall how the shift away from aggressive Fed rate hikes during 2023-2024 drove gold’s rise from previous highs. Current market speculation shows a nearly 90% chance of a rate cut at the meeting on October 30, according to the CME FedWatch tool. Selling out-of-the-money put options below the $3,950 level can allow us to collect premiums while betting that long-term factors will prevent a deeper decline. For a more cautious approach, vertical spreads can help reduce costs. A bear put spread, which involves buying a put option and selling another at a lower strike price, offers a cost-effective way to bet on a slight decline. This strategy is wise, as the Relative Strength Index is nearing oversold levels, indicating that heavy selling pressure may soon ease. The rally that pushed gold past $4,300 greatly exceeded previous highs of about $2,450 an ounce seen in May 2024, highlighting the flow of capital into gold. This pullback seems to be a result of profit-taking, but the underlying factors of geopolitical risk and a weaker US Dollar remain. Consequently, any further dips toward the $4,000 level could provide opportunities to establish bullish positions for the long term, possibly by buying long-dated call options. Create your live VT Markets account and start trading now.

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