Gold has pulled back from its record high of $4,380 but is still above $4,300, reflecting an 8% rally this week. A mix of risk aversion and a weak US Dollar has lifted precious metals. Trade tensions between the US and China are growing, and there are rising concerns about a potential US government shutdown and signals from the Federal Reserve that suggest easing. From a technical standpoint, Gold shows signs of an extended rally, which often leads to corrections. However, the risk-off sentiment and lower US Treasury yields continue to support its price. Currently, Gold is above $4,300, with a possible drop to $4,180. Resistance is seen at $4,400, with a target of $4,455 if it breaks through.

Gold as a Safe Haven

Gold is a reliable safe-haven investment and an effective hedge against inflation. Central banks are the largest buyers, recently acquiring 1,136 tonnes valued at $70 billion. Gold generally rises when the US Dollar falls, making it a good option for diversification in volatile markets. Gold prices can vary due to geopolitical tensions, fears of recession, and changes in interest rates. Typically, Gold prices go up when interest rates drop. A strong US Dollar can push Gold prices down, while a weaker Dollar usually increases Gold prices. With Gold’s recent pullback from its high of $4,380, those holding long futures positions might consider taking some profits. The market has surged 8% this week, which can often lead to a correction. However, factors like US dollar weakness and risk aversion suggest that selling all positions could be hasty. The reasons for higher prices remain strong, fueled by fears of a Fed easing cycle, especially after the September CPI data for 2025 showed a modest 2.8%. Using options can be a smart way to stay bullish while managing risk in this uncertain environment. Buying call options with a strike price around $4,400 or higher can help traders benefit from the escalating US-China trade tensions while limiting their potential losses.

Options Strategies for Managing Risk

The risk of a sharp drop to the $4,180 support level is real. Traders who want to protect their physical holdings or long futures should think about buying protective puts with a strike price near $4,250. This strategy offers a safeguard against an unexpected change in market sentiment, especially if the ongoing US government shutdown, now in its third week, starts to show signs of being resolved. In such uncertain times, a strategy focused on volatility might be ideal for some traders. The market is set for a significant move, but the direction is uncertain. A long straddle, which involves buying both a call and a put option at the same strike price and expiration, can benefit from a major price movement in either direction in the coming weeks. We’ve seen similar patterns before, like the rally that pushed prices past $2,400 in 2024, where brief dips were quickly bought up. This ongoing demand is supported by strong central bank buying—a trend that has intensified since record purchases in 2022 and 2023. According to the latest World Gold Council data from Q2 2025, emerging market banks, especially those in China, continue to build their reserves, providing a solid price floor. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now