Gold prices rose to around $4,185 when trading started in Asia on Friday. This increase comes as people expect the reopening of the US government to bring back economic data and support the idea of further interest rate cuts in the US. The US government shutdown ended once a funding bill was passed. With economic reports back on track, many believe that signs of weakness in the job market could weaken the US Dollar. There is cautious hope, though, as some Federal Reserve officials appear to prefer keeping interest rates steady.

Gold As A Safe Haven Asset

Current market predictions show a 51% chance of a rate cut in December, down from 62.9% earlier. Gold has always been a reliable safe-haven asset, known for its stability during uncertain times, and acts as a hedge against inflation and currency decline. Central banks, especially in emerging markets, are boosting their gold reserves to strengthen their economies. This trend helped add 1,136 tonnes of gold, worth $70 billion, in 2022, making it the largest purchase in history. Gold’s value and price are often tied to the strength of the US Dollar, typically moving in the opposite direction of the Dollar and shifting significantly with changes in global politics or fears of a recession. With gold near $4,185, the market is bracing for interest rate cuts after the US government reopened. The main assumption is that the delayed economic data will confirm a slowdown, compelling the Fed to act. This outlook has driven gold’s price higher. The latest report on October jobs was released, showing the economy added just 45,000 jobs—significantly below expectations. This weak data supports the case for a December rate cut, indicating the shutdown impacted the labor market. In response, the US Dollar weakened, with the DXY index dropping below 99, further benefiting gold.

Inflation Versus Interest Rates

Despite this, Fed officials are still cautious. Recent inflation data from October 2025 indicates that core CPI is at 3.7%, well over the 2% target. This creates a challenge for the Fed as they balance a weakening job market with ongoing inflation. The likelihood of a December rate cut, monitored by the CME FedWatch Tool, now stands at a tense 51%, reflecting significant uncertainty. For traders dealing in derivatives, the clash between weak growth data and cautious remarks from the Fed signals potential for high price volatility. Buying options, such as straddles on gold futures or related ETFs, may be a wise strategy to take advantage of significant price changes, which seem more probable than a period of stability. It’s important to note the solid support from central banks, which acts as a potential safeguard for gold prices. After record purchases in 2022 and 2023, data from the first three quarters of 2025 shows that central banks in emerging markets are continuing to diversify into gold. This long-term demand is a stabilizing factor against future sell-offs. Considering gold’s rise from under $3,000 in early 2024 to current levels, a lot of positive news might already be reflected in the price. The latest Commitment of Traders report indicates that speculative long positions are at multi-year highs. This suggests a crowded trade that could reverse quickly if upcoming data does not fully support the rate-cut expectation. Create your live VT Markets account and start trading now.

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