Gold has hit an all-time high near $3,991 but is currently trading around $3,977, pausing as it approaches the $4,000 level. This slowdown comes as the US Dollar shows renewed strength due to political challenges in Japan and France. During the ongoing US government shutdown, the US Dollar Index increased by 0.33% to 98.42, reflecting the ongoing uncertainty. In September, China’s central bank added to its Gold reserves for the eleventh month in a row.

Impact Of US Government Shutdown

The US government has been shut down for seven days, putting pressure on the labor market. President Trump is open to discussions about healthcare. Kansas City Fed President Jeff Schmid highlighted the rigidity of policies and high inflation. With a light US economic calendar, focus shifts to upcoming comments from the Federal Reserve. Gold prices remain strong, staying above critical moving averages with strong support around $3,950. Momentum indicators show overbought conditions, hinting at possible short-term pullback risks. Gold acts as a safe investment in times of uncertainty and inflation. Central banks, particularly in China, India, and Turkey, are significant Gold buyers and increased their reserves in 2022. Gold prices are influenced by geopolitical tensions, interest rates, and the behavior of the US Dollar. As of October 7, 2025, gold is pausing just below the key $4,000 mark, creating tension for traders. This slowdown comes from an overbought market and a temporary rise in the US Dollar. Key factors include the ongoing US government shutdown and expectations for Federal Reserve rate cuts later this year.

Trading Strategies And Market Trends

With the US government shutdown in its seventh day, there’s potential for gold to break above $4,000. Reflecting on the 35-day shutdown from 2018 to 2019, this current deadlock may extend, increasing the demand for safe-haven assets like gold. Traders might consider buying call options to capitalize on potential gains beyond this psychological threshold while managing risk. However, technical signals indicate an overextended rally, with the Relative Strength Index above 80. Recent data showing an increase in initial jobless claims to 215,000 strengthens the US Dollar in the short term, creating resistance for gold. This opens up opportunities for short-term bearish strategies, like purchasing put options that target a pullback toward the $3,900 support level. Given the clash between fundamental factors and technical fatigue, volatility is something to monitor. The gold volatility index (GVZ) has risen to a six-month high of 21.5, reflecting uncertainty regarding the Fed’s decisions and the resolution of the shutdown. A long straddle strategy, where both a call and a put option are bought, could be effective for profiting from significant price movements in either direction. Central bank demand remains a strong foundation for gold prices. In 2022, central banks bought a record 1,136 tonnes, and global official purchases in 2024 have already surpassed 1,000 tonnes. This ongoing buying pressure means that significant dips are likely to be seen as buying opportunities by larger investors, making aggressive short positions risky beyond a very short period. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now