Gold has jumped above $4,150, thanks to expectations of a more lenient Federal Reserve and a weaker US Dollar. Currently, XAU/USD is trading close to $4,170, showing a nearly 1.0% increase for the day. This rise comes as the US House is set to vote on a stopgap funding bill aimed at ending a prolonged government shutdown. The bill would fund agencies until January 30, 2026, with some departments funded until September 30, 2026. Positive signs regarding the resumption of government operations have eased risk sentiment. Attention is also on postponed US economic data, which will clarify the Fed’s monetary policy. The US Dollar Index (DXY) is around 99.55, indicating a decline as momentum wanes. Recent private employment data revealed mixed results, showing a drop of 11,250 private-sector jobs over the past four weeks, compared to an average loss of 14,250 jobs the previous month.

Technical Breakout and Central Bank Influence

Gold’s breakout above $4,150, confirmed on the 4-hour chart, hints that it may reach $4,200. This former resistance now serves as support, with the Relative Strength Index close to 68. Central banks, especially in emerging economies, have increased their gold reserves, purchasing 1,136 tonnes in 2022—a record high. Gold tends to rise when the US Dollar falls and is influenced by geopolitical uncertainties, interest rates, and the strength of the Dollar. With the current momentum pointing upward, gold appears to be on a bullish trajectory, firmly above the $4,150 breakout level. Traders seeking to profit from this trend might consider buying call options with a strike price near $4,200 set for December or January 2026 expiration. This strategy allows participation in the anticipated price increase while managing risk. Dovish expectations from the Federal Reserve are the main catalyst behind this trend, supported by recent data. The October 2025 Non-Farm Payrolls report revealed only 85,000 jobs added, significantly below projections, signaling a cooling labor market. This trend strengthens our belief that the Fed will signal rate cuts in early 2026, further pressuring the US Dollar. The US Dollar Index’s difficulty in maintaining the 100.00 level, currently around 99.55, supports gold prices. Historically, times when the Fed eases, like when it started in 2019, have seen the Dollar weaken and gold strengthen. If dovish signals from the Fed persist, the DXY may drop to the 98.00 level in the coming weeks.

Volatility and Strategic Considerations

We should keep an eye on the House funding vote as it could introduce short-term volatility. A swift resolution to the government shutdown might create a temporary “risk-on” mood, leading to a dip in gold prices towards the $4,100 support level. Selling cash-secured puts at this level might be a strategy to earn premiums while establishing a more favorable entry point for a long position. Volatility in gold options is currently high due to fiscal uncertainty and the anticipation of delayed economic data. Consequently, strategies like bull call spreads could be appealing, as they lower the cost of entry by selling a higher-strike call against a lower-strike call that is purchased. This approach allows traders to maintain long positions while lessening the potential adverse impact of a volatility drop after the vote. Overall, the foundational support for gold remains strong, regardless of short-term political news. The World Gold Council’s report for the third quarter of 2025 showed that central banks purchased another 280 tonnes, with emerging markets leading the way in diversifying their reserves away from the Dollar. This steady demand, reminiscent of the record buying seen in 2022 and 2023, creates a solid base for the market. Create your live VT Markets account and start trading now.

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