Gold Approaches New Highs

The New Zealand GDT Price Index fell to -1.6%, down from -0.8%. This decline could affect related markets. The Reserve Bank of New Zealand is expected to cut interest rates by another 25 basis points in October. This move reflects ongoing financial changes and economic worries worldwide. Gold is getting close to $4,000 per troy ounce, mainly due to concerns about potential government shutdowns and changing interest rates. Political issues in different regions are also influencing this trend. Bitcoin is stable around $124,000, following a previous high of $126,199. Ethereum is gaining momentum, aiming for record highs with growing interest from institutions. Japan’s new leader, Sanae Takaichi, is continuing a mix of financial support and loose monetary policy. Her win has eased some market uncertainties. In currency markets, EUR/USD is under strain because of political troubles in France and a strong US dollar. GBP/USD is recovering, but remains cautious due to current market risks.

Strategic Market Positioning

Given the current cautious atmosphere caused by fears of a US shutdown and French political issues, the US dollar is likely to remain strong. Historically, times of political uncertainty, like past US budget disputes, lead to a shift towards safer assets. Traders should focus on this dollar strength as the main theme in the coming weeks. Gold’s rise towards the $4,000 mark is closely tied to this uncertainty and expectations of lower interest rates. We recommend buying call options on gold futures as a smart way to benefit from potential gains, similar to the surge we saw in 2020 when global issues drove gold prices to record highs. This strategy offers a controlled-risk way to take advantage of the current market fears. The Euro is particularly weak, heading towards the 1.1650 support level due to instability in France. We’ve seen similar situations before, like during the 2024 French snap election fears, when political risks negatively impacted the currency. Therefore, we suggest buying put options on the EUR/USD to prepare for a possible drop below this crucial level. New Zealand’s outlook remains negative, with the GDT price index down to -1.6% and the Reserve Bank of New Zealand set to cut rates again. This underlying weakness indicates a good opportunity to short the Kiwi dollar, especially against the strong US dollar. Historically, during the RBNZ’s easing cycle in 2019, the NZD/USD pair fell over 8% within a few months, which is a trend we shouldn’t overlook. With the Dow Jones dropping, it’s wise to hedge equity portfolios against a deeper correction. Buying put options on major indices can offer solid protection against potential market downturns if a US government shutdown occurs. The VIX, which measures expected market volatility, has risen by 12% in the past month, indicating that anxiety is increasing. Finally, Japan’s focus on ultra-easy monetary policy under new leadership makes the yen appealing to short. The difference between the US’s tightening stance and Japan’s loose policy supports a long position on USD/JPY. Options strategies that benefit from a rising USD/JPY exchange rate are likely to succeed in this environment. Create your live VT Markets account and start trading now.

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