The price of gold dropped during the North American session on Thursday. It fell from $4,058 to below $4,000, mostly due to a stronger US Dollar. Gold was trading at $3,978, down by 1.5%. Traders took profits, pushing the price down to $3,944 as Chinese traders returned from holidays. Positive news about a possible permanent ceasefire between Israel and Hamas helped boost sentiment, despite the ongoing Russia-Ukraine conflict.

The US Government Shutdown Update

The US government shutdown has now lasted nine days. Minutes from the Federal Reserve revealed concerns about a weakening labor market. Fed Governor Michael Barr expressed doubts about inflation and the jobs market. The US Dollar Index rose by 0.62% to 99.42, and US Treasury yields increased; the 10-year note hit 4.148%. Goldman Sachs updated its gold price forecast for 2026 from $4,300 to $4,900, based on strong ETF inflows and central bank demand. Market expectations indicate there’s a 94% chance of a 25 basis point interest rate cut by the Federal Reserve in October. Gold’s outlook suggests it could reach new highs if it breaks above $4,000. On the other hand, if it drops below $3,950, further declines may be likely. The recent drop from the record high of $4,058 is mainly profit-taking, influenced by a stronger US dollar and news of the ceasefire. This dip below $4,000 could be a buying opportunity rather than a shift in the overall trend. The market is simply taking a break after a significant rally.

Traders Strategy Amidst Gold Volatility

The current US government shutdown, now in its ninth day, supports a bullish outlook on gold. Past shutdowns show that gold rallied over 4% during the extended shutdown in late 2018 and early 2019. This pattern indicates that political uncertainty will keep boosting demand for safe-haven assets. We believe the Federal Reserve will drive the next upward movement. Currently, the market predicts a 94% chance of a rate cut on October 29. Any short-term weakness in gold is likely to be limited. Labor statistics indicate a cooling job market aligned with the Fed’s concerns. Traders face challenges with a strong US dollar and rising yields, which are currently weighing down gold prices. This creates a situation where gold is affected by immediate monetary pressures as well as ongoing geopolitical and economic uncertainties, making it ideal for traders who thrive on volatility. In the coming weeks, using options seems to be the best strategy. Buying call options with strike prices above $4,100 for November expirations allows traders to take advantage of a potential rally following the Fed meeting while managing their risk. Selling cash-secured puts near the $3,800 support level is another effective way to earn income or buy gold at a discount. Overall, the market is significantly influenced by institutional demand. Data from the World Gold Council shows that central banks are continuing their historic purchasing spree into 2024 and the first half of 2025. This steady accumulation creates a solid support level for gold, reducing the chances of a significant correction. Create your live VT Markets account and start trading now.

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