Gold Prices Face Pressure Gold prices increased by over 2% on Monday, bouncing back from losses the previous Friday. This gain comes as the Federal Reserve is expected to continue its easing cycle next week. The softer US Dollar and declining Treasury yields helped gold rise to $4,345, after hitting a low of $4,219 during the day. Comments from US President Donald Trump regarding China did not support the rise in gold prices, especially amid low economic activity in the US. The US government shutdown has now lasted twenty days with no signs of reopening. The US Bureau of Labor Statistics is set to release the Consumer Price Index (CPI) for September this week, which is crucial as the Federal Reserve prepares to announce its monetary policy decisions next week. Markets are anticipating a 96% chance of a rate cut from the US central bank and a 50-basis-point reduction in 2025. Trade discussions between the US and China will continue in Malaysia, just ahead of the November 10 trade truce deadline. Gold prices are under pressure due to a recovering US Dollar. The US Dollar Index dipped by 0.06%, sitting at 98.60, while 10-year Treasury yields decreased by two basis points to 3.991%. Additionally, US real yields, which have an inverse relationship with gold prices, remained steady at 1.723%, down nearly two basis points. Traders will also keep an eye on S&P Global PMI data for October, along with the CPI figures. Geopolitical tensions, including renewed Israel-Hamas hostilities, are impacting gold prices. The US Senate is set to vote on government reopening as it continues its sessions. Geopolitical Tensions and Global Economic Impact Gold has climbed more than 62% in 2025, fueled by geopolitical tensions, central bank purchases, and trends towards de-dollarization. Inflows into Gold ETFs have helped this increase, with prices rising from a yearly starting point of $2,623. Despite this upward trend, there is some hesitation around reaching $4,350. If gold closes above this level, it could test historic highs and possibly reach $4,400 and $4,500. On the other hand, a drop below $4,200 could challenge prices further. Gold remains a crucial economic asset, historically regarded as a store of value and a medium of exchange. In addition to jewelry, it serves as a safe haven and a hedge against inflation and currency depreciation. Central banks are significant holders, using gold to enhance economic trust. In 2022, central banks bought 1,136 tonnes valued at around $70 billion, marking the highest annual acquisition. Emerging economies, like China, India, and Turkey, are notably growing their gold reserves. Gold typically moves inversely to the US Dollar and US Treasuries, affecting its attractiveness when the dollar weakens. Geopolitical unrest or fears of recession can lead to higher gold prices because of its safe-haven reputation. Conversely, higher interest rates may pressure gold’s value. Its price often moves in relation to the value of the dollar—a weak dollar can contribute to rising gold prices. Given the high likelihood of a Federal Reserve rate cut next week, we expect gold prices to rise. Currently, the markets are pricing in a 96% chance of a cut, which is weakening the US Dollar and lowering bond yields. This environment supports a non-yielding asset like gold. The expectation for a more lenient monetary policy is also backed by recent inflation data reflecting a cooling trend. For example, the August 2025 Consumer Price Index (CPI) was reported at 3.4%, suggesting the Fed can ease without causing inflation to spike again. Similar patterns were observed in late 2019, when Fed easing cycles led to notable rallies in precious metals. Uncertainty from the ongoing US government shutdown and renewed conflicts in Gaza are driving a search for safe investments. This trend is reflected in the significant fund flows, with over $5 billion in net inflows into gold-backed ETFs reported in September 2025. This investor interest helps to stabilize prices against possible pullbacks. Looking beyond short-term events, the persistent trend of de-dollarization is a strong support for gold. The latest World Gold Council report shows that central banks purchased an additional 250 tonnes in the third quarter of 2025, continuing a trend of robust buying for nine consecutive quarters. This institutional demand is a key reason gold has appreciated more than 60% this year. For those optimistic about gold’s future, buying call options with strike prices above the all-time high of $4,379, such as the $4,400 or $4,450 strikes, could be a smart strategy for capitalizing on a breakout. These options offer potential upside if the Fed confirms a dovish stance next week. The relatively low implied volatility ahead of the announcement could present a good entry opportunity. Conversely, those holding physical gold or long futures might want to buy put options to guard against a surprise hawkish move or an unexpected resolution of US-China trade discussions. A put option with a strike price below the crucial $4,200 support level can provide protection against a sudden downturn, which, while unlikely, is still a risk. This approach allows investors to stay involved in potential upward movements while limiting downside risk. With several market-moving events coming up this week, including the CPI release and PMI data, we expect volatility to increase. Traders who anticipate significant price moves but are uncertain about the direction could consider a long straddle. This strategy involves buying both a call and a put option with the same strike price and expiration, allowing profit from substantial price swings, whether up or down. Create your live VT Markets account and start trading now.

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