Gold has reached an all-time high near $3,991 but is now trading around $3,977, stalling as it nears the $4,000 mark. This pause in momentum comes amid a renewed strength in the US Dollar, influenced by political issues in Japan and France.

Amid ongoing US government shutdown, the US Dollar Index rose by 0.33% to 98.42, driven by the lack of resolution to the shutdown. China’s central bank increased its Gold reserves for the eleventh consecutive month in September.

Impact Of US Government Shutdown

The US government shutdown has now lasted seven days, threatening the labour market, with President Trump open to talks over healthcare. Kansas City Fed President Jeff Schmid emphasised policy stiffness and high inflation, with the US economic calendar light, drawing focus to upcoming Federal Reserve remarks.

Gold’s uptrend stays firm, with prices above key moving averages and strong support near $3,950. Momentum indicators signal overbought conditions, suggesting potential short-term pullback risks.

Gold serves as a safe-haven asset during instability and inflation. Central banks, notably from China, India, and Turkey, are major Gold buyers, increasing their reserves in 2022. Its price is affected by geopolitical instability, interest rates, and US Dollar behaviour.

As of October 7, 2025, gold is hesitating just below the critical $4,000 level, creating a tense environment for traders. We see this pause as a moment of caution, driven by an overbought market and a short-term rise in the US Dollar. The key drivers remain the ongoing US government shutdown and widespread expectations for Federal Reserve rate cuts later this year.

Trading Strategies And Market Trends

With the US government shutdown now in its seventh day, we see potential for a breakout above $4,000. Looking back at the 35-day shutdown of 2018-2019, this current stalemate could easily extend, further fueling safe-haven demand for bullion. Traders might consider buying call options to capture potential upside beyond this psychological barrier while keeping risk clearly defined.

However, technical indicators are flashing warning signs of an overextended rally, with the Relative Strength Index sitting above 80. Recent data showing initial jobless claims ticking up to 215,000 strengthens the US Dollar in the short term, acting as a headwind for gold. This creates an opportunity for short-term bearish plays, such as buying put options targeting a pullback toward the $3,900 support level.

Given the tension between fundamental drivers and technical exhaustion, we believe volatility is a key factor to watch. The gold volatility index (GVZ) has climbed to a six-month high of 21.5, reflecting market uncertainty around the Fed’s upcoming decision and the shutdown’s outcome. A long straddle, which involves buying both a call and a put option, could be an effective way to profit from a large price swing in either direction.

Underpinning the entire market is the relentless demand from central banks, which provides a strong floor for prices. We remember central banks buying a record 1,136 tonnes back in 2022, and with official global purchases in 2024 already surpassing 1,000 tonnes, this buying pressure is not easing. This suggests that any significant dip is likely a buying opportunity for larger players, making aggressive short positions risky beyond a very short time frame.

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