Gold Faces Political Stalemate Pressure
Technically, extreme overbought conditions as indicated by the Relative Strength Index limit fresh bullish bets on Gold, but recent rebounds suggest a positive near-term outlook. Support is found at $3,825-$3,820, with deeper breakdowns possible towards $3,700 if further selling occurs. The overall market mood of risk-on and risk-off influences major currency and commodity trends.
Gold appears to be consolidating below its record highs, caught between conflicting market signals. The positive tone in equity markets, where the VIX has fallen to around 14, is capping gold’s immediate upside. However, the underlying bias remains bullish, suggesting this period of calm is a precursor to another move higher.
Dovish Federal Reserve Outlook
The primary support for gold comes from expectations of a dovish Federal Reserve. After last month’s disappointing ADP employment report, which showed a net job loss in September 2025, we see the market pricing in a high probability of two more rate cuts this year, according to the CME FedWatch tool. This outlook is keeping the US Dollar weak and making non-yielding gold more attractive.
For derivative traders, this presents an opportunity to position for continued strength while managing risk. Any dips toward the $3,820 level could be seen as a chance to buy call options or construct bull call spreads, which would profit from a rebound while limiting the initial cost. Selling cash-secured puts around the strong $3,800 support level is another strategy to consider, as it allows for acquiring gold at a lower price or simply collecting the premium if it stays above that mark.
Geopolitical tensions are providing a solid floor under the price, limiting the potential for a deep correction. The ongoing US support for Ukrainian strikes on Russian infrastructure means that sudden risk-off events remain a distinct possibility. This backdrop keeps safe-haven demand simmering just below the surface, warranting caution for anyone attempting to aggressively short the metal.
We should also watch how the weak dollar impacts other asset classes in the coming weeks. The Australian Dollar, for instance, just hit a three-month high against the greenback, reflecting the risk-on appetite in commodities. This trend reinforces the case for a weak US Dollar, which should continue to act as a significant tailwind for gold.
