Insights 
VT 
Gold (XAU/USD) has dipped below $4,000, reaching a two-week low as demand for safe-haven assets decreases. The metal is trading at around $3,985, marking a 3% decline from last week’s high of $4,381. Improved market sentiment follows positive news from US-China trade negotiations, with a preliminary framework agreement reported over the weekend. Additional trade pacts with Malaysia, Thailand, Vietnam, and Cambodia have been signed by President Trump.
The ongoing US government shutdown, now in its twenty-seventh day, contributes to market caution. Donations such as SNAP and WIC could be hindered if a resolution is not reached by November. As the week progresses, market attention shifts to central bank meetings, including the Federal Reserve, Bank of Canada, Bank of Japan, and European Central Bank. Traders anticipate a Federal Reserve interest rate cut, as suggested by a 96.7% probability in the CME FedWatch Tool.
Gold Market Insights
Despite current market optimism, gold’s downside remains limited due to risks related to Trump’s trade policies. Technical analysis indicates gold is vulnerable below $4,100, with immediate support at $4,000. The Relative Strength Index suggests bearish momentum persists, with potential further declines to $3,950 if the $4,000 mark is breached.
With gold pulling back below the key $4,000 level, we are seeing a classic battle between short-term risk appetite and underlying monetary policy. This dip from last week’s record high is driven by headlines about a US-China trade framework, prompting profit-taking. Traders should view this as a temporary sentiment shift, not a fundamental change in the long-term trend.
We have seen this pattern before, particularly during the trade negotiations of 2019 and 2020, where initial optimism often faded. This current “framework” could easily falter before the Trump-Xi meeting later this week, making aggressive short positions on gold risky. The market’s positive reaction may be overdone, creating an opportunity for those positioned for renewed uncertainty.
The most critical event this week is the Federal Reserve meeting on Wednesday, where a 25-basis-point rate cut is almost fully priced in. With the latest US CPI data for September 2025 coming in slightly below expectations at 3.1%, the Fed has cover to continue its easing cycle. A rate cut to 4% will lower the opportunity cost of holding non-yielding gold, providing a strong floor under the price.
Trading Strategies and Market Conditions
This creates a setup for heightened volatility, making options strategies attractive. Traders could consider buying straddles or strangles to profit from a large price move in either direction following the Fed announcement and the trade meeting. The current low of $3,985 offers a clear line in the sand for derivative plays.
For those with a directional bias, a decisive break and close below $4,000 could signal further downside, making puts targeting the $3,950 support level attractive. Conversely, if the $4,000 mark holds and the Fed delivers a dovish message, call options could be used to play a potential rebound toward the $4,100 resistance zone. The Relative Strength Index is nearing oversold territory, suggesting downside momentum could be exhausted soon.
It is important to remember the context of this bull market, which saw gold rally from under $2,000 in 2022 to over $4,300. This move was fueled by persistent inflation and the massive expansion of central bank balance sheets, like the Fed’s, which remains well above $7 trillion. The current pullback is happening within a powerful long-term uptrend driven by currency debasement.
Finally, the ongoing US government shutdown, now at 27 days, adds another layer of support for safe havens. This is approaching the length of the record 35-day shutdown in 2018-2019, which the Congressional Budget Office estimated shaved 0.2% off real GDP. The longer this impasse continues, the more it will weigh on economic growth and push investors back towards gold.
