Gold (XAU/USD) stabilised above $4,100, maintaining a positive bias despite trading below a recent high. US President Trump’s shift on China tariffs supports market optimism, while the US Dollar (USD) gains for a second day. The anticipated reduction in US Federal Reserve rates in 2025 might still bolster gold. Additionally, a potential prolonged US government shutdown poses economic risks, further benefiting gold.

Geopolitical factors also play a role, with renewed US-China trade tensions and the Russia-Ukraine conflict influencing gold’s upward trend. Trump’s softened rhetoric on China eases trade war concerns but does not affect gold’s positive momentum. Traders see a high probability of the US Federal Reserve cutting rates further, reinforcing gold’s appeal. Despite USD strength, gold’s bullish outlook remains unaffected.

Technical Indicators And Market Movements

Technical indicators suggest gold’s upward trend is supported by a multi-week ascending trend-line. The recent breach of $4,055-$4,060 resistance confirms a positive short-term outlook, although caution is advised due to overbought RSI conditions. Any pullbacks might present buying opportunities, but a breach below $4,060 could signal potential declines to the $4,000 mark. The USD shows gains against major currencies, particularly the Australian Dollar.

Given that gold is trading near its all-time high, we must watch for conflicting signals. The primary driver remains the Federal Reserve, as data from the CME FedWatch Tool shows a 98% probability of a 25-basis-point rate cut at the October 29th meeting. This expectation of cheaper money makes holding non-yielding gold very attractive for the weeks ahead.

The ongoing US government shutdown, now entering its third week, adds a strong layer of support for safe-haven assets. The Congressional Budget Office released an initial estimate last week suggesting the shutdown is already trimming 0.2% from Q4 GDP growth for each week it continues, fueling economic uncertainty. This situation provides a solid floor for gold prices, as we saw during the prolonged shutdown in late 2018 which preceded a six-month rally in gold.

Inflation Data And Institutional Demand

This dovish Fed stance is justified by recent inflation data, with the latest September CPI report showing headline inflation cooling to 2.8% year-over-year. Furthermore, World Gold Council data for Q3 2025 showed that central banks bought a net 250 tonnes of gold, marking the fifth consecutive quarter of robust institutional demand. These fundamental factors suggest the current high price is well-supported beyond short-term geopolitical noise.

In the derivatives market, we are seeing this bullishness reflected in options positioning. Open interest for call options on December gold futures with strike prices of $4,200 and $4,250 has surged over 40% in the last week. However, we must remain cautious, as the daily Relative Strength Index (RSI) is above 80, indicating extremely overbought conditions that could trigger a sharp pullback.

Therefore, our strategy should focus on buying into any price dips rather than chasing the rally at these highs. We can look back to the price action in 2023, when gold corrected after hitting new highs before resuming its upward trend. A disciplined approach would be to view any retracement towards the $4,060-$4,055 support zone as a potential entry point for long positions.

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