Insights 
VT 
Gold (XAU/USD) continues its upward movement, trading around $4,365, following a session high of $4,380. Concerns about a prolonged US government shutdown, expectations of further US interest rate cuts, and US-China trade tensions boost the metal.
The US government shutdown, in its third week, affects the US Dollar and supports Gold’s price. Treasury officials estimate the shutdown could cost the US economy $15 billion weekly.
Federal Reserve Rate Cut Prospects
US Federal Reserve rate cut prospects strengthen Gold’s position. Fed’s Powell highlighted risks to the economy, suggesting possible interest rate cuts, while Governor Waller also supports further reductions.
US-China trade tensions escalate, potentially benefiting Gold. Meanwhile, easing geopolitical tensions could impact the metal’s safe-haven appeal.
Gold serves as a safe-haven asset and a hedge against inflation. It is viewed as a stable investment amid uncertainty.
Central banks, particularly from China, India, and Turkey, are major Gold buyers, adding 1,136 tonnes to reserves in 2022.
Gold’s price is inversely correlated with the US Dollar and often moves opposite to risk assets. Geopolitical instability and interest rate changes also impact the metal’s value, with a stronger Dollar likely to suppress prices.
Market Position and Strategy
As of our current date, October 17, 2025, with gold breaking above $4,350, the clear signal is to maintain a bullish stance. We are seeing derivative traders favor long call options to capture further upside potential from the strong momentum. This approach allows for participation in the rally while defining the maximum risk involved.
The US government shutdown, now entering its third week, is a primary driver for this safe-haven flow. Looking back, this is already longer than the 16-day shutdown of 2013, and the market is becoming concerned it could approach the record 35-day shutdown we saw in 2018-2019. The resulting weakness in the US Dollar is providing a direct tailwind for gold prices.
Furthermore, we see the market aggressively pricing in more interest rate cuts from the Federal Reserve. Current CME Group data suggests a greater than 90% probability of at least two more rate cuts by year-end, which lowers the opportunity cost of holding a non-yielding asset like gold. This makes futures contracts and other long positions more attractive.
This sustained rally has pushed implied volatility in gold options significantly higher, making outright call purchases expensive. Therefore, we believe a prudent strategy would be to use bull call spreads. This allows traders to reduce their initial premium cost while still profiting from a continued, steady rise in the metal’s price.
This move is also supported by a longer-term trend of central bank accumulation that we have been observing for years. We recall the World Gold Council reporting record purchases of 1,136 tonnes back in 2022, a trend that continued through 2023 and 2024 as nations diversified away from the dollar. This consistent institutional buying provides a strong underlying support level for the price.
