Gold rose during the European session due to potential Federal Reserve rate cuts and ongoing geopolitical tensions. Although there was interest in buying dips, positive risk sentiment limited large gains for the metal. The US Dollar struggled to keep its momentum following a previous rebound, which also boosted Gold, with expectations that the Fed might lower borrowing costs twice more this year. Even with a US government shutdown, global markets remained optimistic, helping Wall Street and Asian stocks. This affected the demand for Gold. Traders are eager for upcoming speeches from Federal Reserve members, as they could influence the US Dollar and impact Gold prices. Nevertheless, Gold looks set to achieve a seventh straight week of gains, with market participants monitoring key price levels for direction.

Geopolitical Events And Gold’s Role

Geopolitical events, like US support for Ukraine, continue to support Gold’s value amid larger economic discussions. Central banks are significant Gold buyers, adding 1,136 tonnes in 2022. The connection between Gold, the US Dollar, and interest rates is significant, with predictions of a weaker Dollar likely benefiting Gold. Additionally, Gold acts as a hedge against inflation and economic uncertainty, solidifying its status as a safe-haven asset in unstable times. The gold market is currently in a tug-of-war, with strong support clashing against a risk-on sentiment in equities. Expectations for Federal Reserve rate cuts are strengthening, with the CME FedWatch Tool showing an 85% chance of a 25-basis-point cut at the October 29th meeting. This belief is providing a solid foundation for Gold prices, making dip-buying appealing. The US Dollar remains weak, a key factor contributing to Gold’s strength. The ongoing government shutdown adds uncertainty; looking back at the 2018-2019 shutdown, we observed a temporary decline in economic activity, which ultimately lifted Gold prices. Recent jobless claims data showed a slight increase to 225,000, with some attributing it to early shutdown effects on federal contractors. Geopolitical tensions offer ongoing support for Gold. The confirmation of US intelligence aiding Ukraine with long-range strikes on Russian energy infrastructure adds uncertainty and prevents significant sell-offs. This scenario reminds us of the price spikes at the start of 2022, although the market now appears more accustomed to this looming risk.

Trading Strategies And Market Outlook

With the daily RSI indicating overbought conditions and prices held back by the risk-on sentiment, taking long positions near the all-time high of $3,900 seems risky in the short term. We believe this environment is perfect for volatility-based derivative strategies. Buying November-expiry straddles or strangles could allow traders to benefit from a significant price move—whether a rise above $3,900 on weak data or a fall toward $3,800 if risk appetite decreases. For futures traders, we anticipate important entry points in the coming weeks. A sustained move above the $3,865 resistance would signal a chance to re-establish long positions, aiming for a retest of the $3,900 peak. Conversely, a solid break below the $3,820 support level would indicate the start of a deeper correction, making the way for short positions targeting the $3,750 range. Create your live VT Markets account and start trading now.

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