Gold has hit a new all-time high, fueled by global tensions and the chance of a US government shutdown. Factors supporting this rise include expected cuts to US Federal Reserve interest rates and a weakening US Dollar. As a non-yielding asset, gold is thriving under the current market conditions. Although gold has pulled back slightly from its peak, it still finds support in strong fundamental factors. Recent short-term charts indicate overbought conditions, leading to some profit-taking. However, many see price dips as buying opportunities. Upcoming US economic data and statements from Federal Open Market Committee (FOMC) members are expected to impact demand for the US Dollar.

Geopolitical Factors and Market Trends

A recent meeting between US President Donald Trump and congressional leaders did not resolve the budget deadlock, increasing the chance of a government shutdown. Concerns over the US potentially supplying Tomahawk missiles to Ukraine also raise geopolitical risks. Trump’s attempts for peace in the Gaza war can further affect market dynamics. The FedWatch Tool shows a strong likelihood of the Fed cutting rates, which would lower the US Dollar and boost gold prices. Technically, gold’s recent rise above $3,800 strengthens bullish sentiment. However, the Relative Strength Index (RSI) suggests overbought conditions, implying a possible short-term consolidation. If gold drops below $3,850, it may be seen as a buying opportunity, with $3,800 marking key support. Gold is on an upward trend, but the market appears overbought, with the daily RSI nearing 80. The key drivers of this surge—geopolitical concerns and anticipated Federal Reserve rate cuts—remain persistent. Thus, any price pullback should be viewed as a buying chance, not a sign of a trend reversal. In the coming weeks, we should consider buying call options or bull call spreads on gold futures or related ETFs like GLD. A good entry point might be a dip toward $3,835 or the major support level at $3,800. This week’s JOLTS job openings report could create the needed volatility to trigger such a pullback, offering a buying opportunity.

Investment Strategies and Market Signals

This strategy is backed by recent data, as the US inflation report for August 2025 shows a CPI of 2.8%. This reinforces the market’s 90% chance of an October rate cut. However, with the VIX volatility index remaining high above 20 for the past month, option premiums are costly. This makes call spreads a more affordable way to position for further gains compared to buying calls directly. Looking back, we witnessed similar safe-haven buying during US government shutdowns in 2013 and 2018, where gold surged amid uncertainty. Currently, gold has surpassed previous record highs of around $2,450 seen in the spring of 2024. This momentum indicates strong underlying strength that should not be overlooked. The weakening US Dollar also presents new opportunities. With the Dollar Index (DXY) falling below 102.50 this week, we might consider shorting DXY futures or buying calls on currency ETFs like FXE, which tracks the Euro. The dollar’s decline against almost all major currencies should continue to support rising gold prices. We also need to monitor the evolving geopolitical situation, including talks for a US-brokered peace plan in Gaza and any increase in tensions in Ukraine. A breakdown in negotiations or further conflicts would likely boost gold demand as a safe haven. This ongoing uncertainty provides a solid price floor, limiting potential downside. Create your live VT Markets account and start trading now.

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