Market Outlook
Gold experienced a modest rise but remains below its record peak as traders take a breather in the face of overbought conditions. The backdrop remains favourable for gold, with geopolitical tensions and a partial US government shutdown providing support for the precious metal.
Investors are leaning towards gold as uncertainty persists, with gold rising by 45% since 2025 and 11% in September. A failed Republican spending bill could lead to further government shutdowns, potentially boosting gold demand and encouraging easing from the Federal Reserve.
Traders are betting on a 95% chance of a rate cut at the October Federal Reserve meeting and a 75% probability of another in December. While Dallas Fed President Logan cautioned about inflation, geopolitical risks like Russia’s stance on US missile supplies to Ukraine further support gold.
Technically, the gold price is in a positive outlook, although the RSI indicates overbought conditions. Any dip below $3,835 may find buying support, but a drop below $3,800 could lead to deeper losses.
The Federal Reserve’s monetary policy, through rate adjustments, greatly impacts the US dollar. Quantitative easing and tightening are tools used in specific economic scenarios, influencing the dollar’s strength.
Gold Price Dynamics
Given gold’s extremely overbought condition, we see the current pause below the all-time high as a healthy consolidation rather than a reversal. The fundamental picture, driven by geopolitical risk and the US government shutdown, remains highly supportive for bullion. Any pullback towards support should be seen as a buying opportunity, as the path of least resistance is still upwards.
The partial US government shutdown, which began this week in October 2025, is a significant tailwind for safe-haven assets. Looking back at the prolonged 35-day shutdown that started in late 2018, we saw gold prices rally over 4% during that period of political instability. We anticipate a similar flight to safety now, which could push prices even higher.
Market conviction for a Federal Reserve pivot is incredibly strong, with Fed fund futures pricing in a 95% chance of a rate cut this month. This sentiment is hardening despite core inflation still lingering around 3.2% as of the last report for August 2025. This echoes the sentiment we saw in late 2023, when expectations of rate cuts in 2024 fueled a major gold rally.
For derivative traders, this suggests a “buy the dip” strategy using options is prudent. Rather than chasing the top, consider selling out-of-the-money put options with strike prices near key support levels like $3,800 or $3,750 for November expiration. This approach allows you to collect premium while waiting for a more attractive entry point.
Those trading futures should watch the $3,816 to $3,835 area closely, as this ascending trend-line represents the first major support. Establishing new long positions on a dip to this zone could offer a favorable risk-reward ratio. A break below the $3,800 psychological level, however, would warrant a temporary defensive stance.
The bullish outlook is further confirmed by institutional positioning. The latest Commitment of Traders (CFTC) report from late September 2025 showed that money managers increased their net-long positions in gold futures to the highest level in over two years. This shows that large speculators are aligned with the view that gold has more room to run.
