**Technical Analysis of Gold** Gold (XAU/USD) has dropped by 1.75% to about $4,050 per ounce. This decrease is mainly due to increased demand for the US Dollar and traders cashing in on profits. The end of the Diwali festival in India, which usually boosts Gold demand, is also likely to hurt short-term physical demand. Traders are being careful as they await the US Consumer Price Index (CPI) report for September. While Gold is currently on a downward trend, other factors like the US government shutdown and ongoing US-China trade tensions still make it a desirable safe-haven asset. Many in the market expect the Federal Reserve to cut interest rates by 25 basis points in October and December. Lower interest rates mean less cost for holding Gold, which could help stabilize its price. On the technical side, Gold is moving within a symmetrical triangle pattern on the 4-hour chart. Following the CPI report, a breakout may occur. The immediate range is between $4,040 and $4,150. If Gold falls below $4,040, it could drop further to around $3,945. If it moves above $4,150, it might rebound towards $4,220 or more. The Relative Strength Index (RSI) indicates continued potential for short-term declines. **Market Anticipation for the CPI Report** Gold is pulling back to around $4,050 after reaching a record high earlier this week. This has created a tight consolidation pattern. Traders are closely monitoring this range ahead of the US CPI inflation data due later today. The market is looking for a catalyst that could lead to a significant breakout from this current state of indecision. Today’s CPI report for September is crucial, with forecasts predicting a slight drop in the annual rate to 2.9%, down from 3.1% over the past two quarters. A reading at or below this forecast could bolster expectations of the Federal Reserve cutting interest rates, likely causing Gold prices to rise. Conversely, an unexpected increase in inflation might push Gold down to the $4,000 psychological support level. Given the potential for significant movement after the CPI release, using a long straddle strategy with options expiring in November could be effective. This involves buying both a call and a put option near the current price, allowing for profit from large price swings in either direction. This strategy takes advantage of the increased volatility expected later today and into next week. The broader environment continues to favor Gold, primarily due to the ongoing US government shutdown, now stretching into its 24th day. A similar shutdown lasting 35 days in late 2018 and early 2019 was estimated to have cut quarterly GDP by 0.2%. These economic concerns are currently driving safe-haven demand. Political uncertainty provides a solid foundation for Gold prices, even if there’s a temporary dip. For those with a clear directional bias, a break above the $4,150 resistance level could signal a buy for call options, aiming for a retest of the recent highs around $4,380. On the other hand, a significant drop below the $4,040 support might lead traders to buy put options. This would bet on a strong inflation report or a stronger dollar pushing prices down to the $3,945 level seen earlier this month. Create your live VT Markets account and start trading now.

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