Insights 
VT 
Gold remains stable near its peak amidst ongoing US-China trade tensions and geopolitical risks. The precious metal benefits from safe-haven demand due to the protracted Russia-Ukraine conflict and bets for further Federal Reserve rate cuts.
US President Donald Trump’s reconsideration of a 100% tariff on Chinese goods initially eased concerns. However, his later remarks about the potential for Tomahawk missile deployment in the Russia-Ukraine war kept geopolitical risks high, further boosting gold prices.
US Government Shutdown Impact
The US government faces a continued shutdown, which adds to economic worries. The lack of congressional progress and escalating rhetoric over international relations fuel uncertainties, supporting gold’s upward trajectory.
Expectations of future US interest rate cuts, with probability rates of 96% for October and 87% for December, bolster the case for an appreciating gold market. Despite this, short-term overbought conditions suggest possible near-term consolidation.
A corrective dip below $4,020-4,018 could attract buyers at $4,000, while sustained support remains around $3,965-3,964. Failure to hold above these levels might lead to technical selling, potentially bringing prices down to $3,900.
In financial terms, “risk-on” markets see asset prices rise, whereas “risk-off” markets favour safe-haven assets like gold. Currencies such as the Australian and Canadian dollars perform well in risk-on phases, while the US Dollar and Japanese Yen thrive in risk-off situations.
Current Market Conditions
With the CBOE Volatility Index (VIX) holding above 28, a level indicating significant market fear, we see the current environment as decidedly risk-off. The combination of US-China trade uncertainty, a prolonged government shutdown, and geopolitical tensions in Ukraine creates a powerful backdrop for safe-haven assets. This mix of factors suggests traders should position for continued market anxiety in the near term.
The fundamental case for gold remains strong, with recent data showing net inflows of over $5 billion into gold-backed ETFs in September 2025. While conditions are overbought, we would view any pullback towards the $4,000 psychological level as a buying opportunity for call options or futures. This provides a strategic entry point to join the established uptrend without chasing the absolute peak.
Given the uncertainty, we are cautious on commodity-linked currencies like the Australian Dollar, which is sensitive to Chinese economic sentiment. Derivative traders could consider put options on the AUD/USD pair to hedge against a potential escalation in the trade dispute. This aligns with the classic risk-off playbook where safe-haven currencies are preferred over those tied to global growth.
The expectation of two more Fed rate cuts this year is a powerful tailwind, especially with the latest flash Manufacturing PMI for September falling to 48.5, indicating economic contraction. We saw a similar dynamic during the 2019 trade disputes, when gold rallied over 15% in the second half of the year as the Fed pivoted to a more dovish stance. This historical precedent reinforces our conviction in the current long-gold thesis.
The combination of a government shutdown and geopolitical threats creates a difficult environment for equities. We would advise using derivatives to hedge long-only stock portfolios or to speculate on downside risk. Buying put options on the S&P 500 or selling call spreads can provide protection against a market correction in the coming weeks.
