Insights 
VT 
Gold price (XAU/USD) recovered to nearly $4,150 during the early European trading hours on Wednesday. This upward movement is amid concerns about the US government shutdown and global government debt worries.
The expectation of the US Federal Reserve cutting interest rates in October could further boost Gold prices. Lower rates make holding non-yielding assets like Gold more attractive.
Us China Trade Tensions And Gold Price
US-China trade tensions have lessened as both nations aim to settle disputes by the November 1 tariff deadline. This could affect the safe-haven appeal of Gold.
Traders are focusing on the upcoming US Consumer Price Index data, expecting a 3.1% YoY rise in September. Higher-than-expected inflation could strengthen the US Dollar, impacting Gold prices.
The US government shutdown enters its fourth week with another Senate failure to pass a funding measure. US-China trade talks continue, potentially influenced by President Trump’s recent statements.
A 99% probability of a US interest rate cut next week is noted, following another expected reduction in December. Gold’s price remains strong, trading above its 100-day Exponential Moving Average.
The first resistance level is $4,140, with further gains to $4,330 and $4,370-$4,380. On the downside, key support lies at $4,000, followed by $3,947 and $3,838.
Interest rates influence currency strength and the cost of holding assets like Gold. High rates boost the US Dollar, affecting Dollar-priced commodities.
With gold near $4,150, the immediate focus is on the US government shutdown, which is now in its fourth week and approaching the 35-day record we saw back in the winter of 2018-2019. This ongoing political instability, combined with global fears over government debt, provides strong support for holding gold. US national debt has now surpassed $40 trillion, a figure that continues to underpin the safe-haven appeal of precious metals.
The Impact Of The Fed’s Interest Rate Cut On Gold
The market has almost fully priced in a Federal Reserve interest rate cut for next week, creating a bullish environment for gold. After the aggressive rate hikes that ended in 2024, this easing cycle is expected to continue, which weakens the dollar and reduces the opportunity cost of holding a non-yielding asset. This makes call options on gold attractive, especially with strikes above the current resistance level of $4,140.
However, the US Consumer Price Index data due this Friday presents a significant risk for gold bulls. While the market expects a 3.1% annual inflation rate, anything higher could force the Fed to reconsider its rate-cutting path and cause a rapid sell-off in gold. Given this binary risk, purchasing a straddle using options on a major gold ETF could be a prudent way to trade the volatility around the CPI announcement.
We should also be wary of the positive headlines regarding US-China trade talks. A sudden deal could temporarily reduce the need for safe havens and pull gold back towards the key $4,000 psychological level. Traders could consider buying out-of-the-money put options as a hedge against a sudden de-escalation in trade tensions.
The technical chart shows that while the long-term trend is positive, momentum is neutral in the short term. This suggests a period of consolidation or a pullback is possible before the next major move. If gold breaks below the $4,000 support level, it could trigger a faster decline toward the October 10 low of $3,947.
Looking at the bigger picture, the high price of gold is a reflection of sustained economic uncertainty and currency debasement that has been building for years. The current US debt-to-GDP ratio is now over 125%, a concerning statistic that supports a long-term allocation to hard assets. For derivatives traders, this means any significant dips in price should be seen as potential opportunities to establish longer-dated bullish positions.
