Gold has recently surpassed its earlier Asian high of $3508, reaching a new peak at $3512. This marks a potential turning point as gold has been consolidating just below $3500 for several months. A sustained break above could initiate a longer upward trend.
The US dollar’s position is unstable due to factors like adjustments at the Federal Reserve and changes in the Bureau of Labor Statistics. Such actions contribute to market volatility. Despite September being a traditionally weak month for gold, strength is typically observed from November through February.
Potential Risks and Opportunities for Gold
Potential risks include judicial action against tariffs and lack of Congressional support, which may reduce this year’s market volatility. This could lead to concerns over sovereign debt issues. A pullback may occur, but subsequent months often present growth opportunities for gold.
We are seeing gold push through the key $3500 level, hitting a new record high today after months of sideways trading. This type of breakout after a long consolidation often signals the beginning of a stronger, more extended move. The Cboe Gold Volatility Index (GVZ) has also jumped over 15% this past week, telling us that traders are finally pricing in much bigger swings ahead.
The fundamental picture strongly supports this bullish view, especially with actions designed to weaken the US dollar. The Dollar Index (DXY) is already trading down around 95.20, and with recent appointments stacking the Fed, the market is now pricing in an 85% probability of a rate cut by the end of the year. Uncertainty about the reliability of economic data, following the replacement of the head of the BLS, is also pushing capital toward the safety of gold.
Seasonal Considerations for Gold Prices
However, we need to be mindful of the seasonal headwinds right now. September is historically the single worst month for gold prices. Looking at the data from 2005 through 2024, the metal has averaged a loss during this month, so a pullback would not be unusual.
For derivative traders, this potential for a short-term dip could be an opportunity to position for the much stronger seasonal period that typically runs from November through February. Buying longer-dated call options, like those for December 2025 or March 2026, on any price weakness could be a prudent strategy. We are already seeing a massive increase in open interest for the December $3600 and $3700 call strikes.
The biggest risk to this entire outlook comes from the political arena. If the courts or Congress succeed in blocking the president’s proposed tariffs, the market uncertainty that has been a tailwind for gold this year could evaporate. Such a move would likely cause the dollar to strengthen and reduce the safe-haven demand for gold, potentially unwinding the recent gains.
