Insights 
VT 
Gold Stabilises As US Dollar Loses Steam
Gold’s near-term outlook is mildly bearish as markets process the recent correction, but the broader view is supportive. Downside risks are limited by anticipated dovish Federal Reserve actions, the US government shutdown, and ongoing geopolitical uncertainties.
US President Trump’s comments about a possible meeting with Chinese President Xi Jinping in South Korea left markets uncertain. High-level trade discussions between US and Chinese officials aim to prevent tariff escalation before November 10.
The US government shutdown is now in its twenty-second day, the second-longest in US history, with funding discussions stalled. Meanwhile, Europe and Ukraine plan a peace proposal for the war with Russia. Key economic data this week include the CPI and preliminary PMI readings, with a rate cut expected soon.
Short Term Strategies And Market Uncertainty
Given the sharp drop from recent record highs, we see a short-term bearish trend, confirmed by the break below the $4,200 technical level. We should consider strategies that capitalize on further downside or consolidation in the coming days. Buying put options with a strike price near $4,000 would be a direct play on this momentum, offering a defined-risk way to profit if gold continues to fall toward the $3,950 support zone.
However, with major event risk from the US-China trade talks and the upcoming Federal Reserve meeting, volatility is the main theme. A sudden breakdown in negotiations could easily send gold soaring again, so we should prepare for a sharp move in either direction. This makes a long straddle, which involves buying both a call and a put option with the same strike price and expiration, an attractive strategy to profit from a significant price swing regardless of its direction.
The fundamental backdrop remains supportive, especially with the US government shutdown now at 22 days, approaching the record 35-day shutdown we experienced back in 2018-2019. We also remember how the pivot away from the aggressive Fed rate hikes of 2023-2024 fueled gold’s initial climb from its previous highs. With markets pricing in a near 90% chance of a rate cut at the October 30th meeting, according to the CME FedWatch tool, selling out-of-the-money put options below the $3,950 support level is a way to collect premium while betting these long-term factors will prevent a deeper crash.
For a more conservative approach, we can use vertical spreads to lower costs. A bear put spread, which involves buying a put option and selling another at a lower strike price, would be a cost-effective way to bet on a modest decline. This is a prudent move, as the Relative Strength Index is nearing oversold territory, suggesting the intense selling pressure may soon ease.
The rally that pushed gold past $4,300 dwarfed the previous record highs near $2,450 an ounce that we saw back in May 2024, showing just how much capital has flowed into the metal. The current pullback appears to be profit-taking, but the underlying demand drivers of geopolitical risk and expectations for a softer US Dollar persist. Therefore, we should view any further dips toward the $4,000 psychological level as potential opportunities to structure bullish positions for the longer term, perhaps by buying long-dated call options.
