Gold Prices Advance
The NEVI Manufacturing PMI for the Netherlands rose to 53.7 in September, up from 51.9 in the previous month. This data suggests an expansion in the manufacturing sector.
The Euro traded near 1.1750 after the release of Eurozone inflation data, while the US Dollar experienced weakness due to a government shutdown. The GBP/USD pair rose above 1.3450, sustained by concerns over the US fiscal situation.
Gold prices continued to advance, nearing the $3,900 mark amid geopolitical tensions and the US government shutdown. US employment figures are under focus, with the ADP Employment Change report expected to provide insights into payroll growth.
The US government has shut down for the first time in six years, as lawmakers failed to approve a funding bill. The potential delay of US economic data releases is a concern if funding issues persist.
Given the US government shutdown, the primary trade in the coming weeks is to position for continued dollar weakness. The shutdown is creating significant uncertainty, which is pushing capital away from US assets and into safe havens and other major currencies. This creates clear directional opportunities against the dollar.
Positive Netherlands Manufacturing PMI
The positive Netherlands Manufacturing PMI, rising to 53.7, provides a solid reason to favor the Euro over other currencies. This indicator of expansion adds a fundamental strength to the EUR/USD pair, which is already benefiting from the dollar’s political troubles. We should consider buying near-term call options on EUR/USD to capitalize on a potential move toward the 1.1800 level.
Gold’s rally toward $3,900 is a direct result of the shutdown creating safe-haven demand, a trend we saw during previous periods of geopolitical stress in 2024. As long as Washington remains deadlocked, traders should view any small dip in gold prices as a buying opportunity. The momentum is clearly upward, and futures contracts offer a straightforward way to ride this trend.
We need to prepare for heightened volatility, as the duration of the shutdown is unknown. Looking back at the 35-day shutdown in 2018-2019, we remember that crucial data from agencies like the Bureau of Labor Statistics was delayed, leaving the Federal Reserve and markets in the dark. This lack of visibility on key reports like jobs and inflation, which just last month showed core CPI at a stubborn 3.4%, will likely keep markets on edge.
This environment makes owning options attractive due to the potential for sharp, sudden market moves once a funding resolution is reached. Until then, we can use the dollar’s weakness to our advantage by staying long on pairs like GBP/USD, which has already cleared the 1.3450 mark. Remember that these trends can reverse quickly, so using derivatives with defined risk is a prudent strategy.
