Insights 
VT 
Fed Policies And US-China Trade Developments
The Fed has also announced the cessation of its balance sheet reduction by December, ending quantitative tightening. Despite Powell’s caution over further rate moves, the USD remains under pressure, affecting risk perceptions for gold. Meanwhile, traders anticipate insights from FOMC members on future rate trajectories, impacting USD and gold dynamics.
Gold has struggled to find support above key Fibonacci retracement levels following a recent dip. Failure above these technical hurdles may invite sellers near $4,000, while weakness below $3,950 could expose gold to further declines, testing significant support areas around $3,900 and lower.
Given that gold has reclaimed the $4,000 level, we see the market caught between two opposing forces. On one hand, the ongoing US government shutdown is weakening the dollar and boosting gold’s safe-haven appeal. On the other, the Federal Reserve remains hesitant to signal further rate cuts, which provides a floor for the dollar and a ceiling for gold.
The economic risks of the shutdown are becoming more concrete, which traders should watch closely. We’ve seen the latest Congressional Budget Office estimates from last week, which project a potential 0.5% drag on fourth-quarter GDP if the shutdown persists through November. This data point reinforces the bearish sentiment for the US economy and, by extension, the dollar.
Inflation Figures And Market Strategies
However, the Fed’s hawkish stance is supported by recent inflation figures. The Consumer Price Index for September 2025 came in at 3.1%, slightly above forecasts, making it difficult for the central bank to justify another rate cut in December. This policy conflict is the primary source of the current market uncertainty.
For derivative traders, this environment suggests high implied volatility in the coming weeks. We believe strategies that profit from significant price movement, regardless of direction, are advantageous. Options strategies like long straddles or strangles on gold futures or major gold ETFs could be effective.
Looking back at similar periods of high uncertainty, such as the debt ceiling crisis in 2011 or the early days of the pandemic in 2020, gold saw sharp, erratic swings. We expect this pattern to repeat, creating opportunities for those positioned for volatility rather than a specific direction. The CBOE Gold Volatility Index (GVZ) has already ticked up to 18.5, its highest level in three months, reflecting this market tension.
Specifically, traders could look at buying puts with strike prices below the critical $3,900 support level to hedge against a failure to hold current gains. Conversely, call options with strikes above the $4,016 moving average hurdle could capture upside if dollar weakness accelerates. The key is to position for a breakout from the current range.
The Dollar Index (DXY) will be the most important confirming indicator for any gold-related trade. We’ve seen it fail to push past the 107.50 level multiple times this month. A decisive break below the 106.00 support level would likely signal the next major leg up for gold towards the $4,100 mark.
