Market Conditions

The CME FedWatch Tool shows a 97% chance of the Federal Reserve cutting rates in October and a 76% chance for December. This news is boosting the US Dollar, making Gold more appealing to foreign buyers. Concerns about a potential government shutdown in the US are also driving Gold prices higher. A deadlock between Republicans and Democrats could lead to a shutdown and delay important data from the US Labor Department. Gold is valued for its stability, is used in jewelry, and serves as a safe haven during uncertain times. Central banks are major buyers of Gold, purchasing 1,136 tonnes worth about $70 billion in 2022. The price of Gold typically rises when interest rates fall and is often inversely related to the US Dollar and Treasuries. With Gold recently reaching an all-time high of $3,871, the positive trend seems strong. Traders should see this as a new support level rather than a peak, indicating more potential growth in the coming weeks. The market is predicting a 97% chance of a Federal Reserve rate cut in October, which should continue to drive up Gold prices. Buying call options on Gold futures or related ETFs is a direct way to benefit from this anticipated rise. A similar situation occurred before the rate cuts in late 2024, which led to a significant price increase.

Factors Influencing Gold

This optimistic outlook is supported by recent job data. The September Non-Farm Payrolls report showed a job growth of only 95,000, much less than the expected 150,000. This slowdown is putting pressure on the US Dollar, which has fallen 2% in the past month against other currencies. A weaker Dollar makes Gold cheaper for foreign buyers, increasing its demand. The possibility of a US government shutdown is also adding uncertainty, pushing investors towards safe-haven assets like Gold. A shutdown would delay important economic data, leading to more guesswork in the market and likely increasing volatility. We saw a similar shift towards safety during a recent shutdown scare in early 2025. It’s important to note the strong demand from global central banks, which have been major buyers this year. In the third quarter of 2025, central banks acquired another 280 tonnes of Gold, with the People’s Bank of China leading the charge for the 23rd consecutive month. This institutional buying supports higher Gold prices. Since Gold prices are at record highs, traders should be careful with risk management. Using bull call spreads can help participants benefit from potential gains up to the $4,000 level while limiting possible losses. This approach is wiser than holding long futures positions at these elevated prices. Volatility in the broader market also supports a positive outlook for Gold. The CBOE Volatility Index (VIX) has remained above 22 for the past month, indicating ongoing fear in the stock market. Selling out-of-the-money put options on Gold could be a way to earn a premium while betting that this fear will keep Gold prices stable. Create your live VT Markets account and start trading now.

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