Insights 
VT 
Gold prices in India experienced an increase on Monday. Per FXStreet data, the price per gram rose to 11,573.69 Indian Rupees from Friday’s 11,463.25, and Gold per tola increased to 134,993.60 INR from 133,705.10 INR.
Global tensions rose as the US President announced potential tariffs on Chinese exports, causing uncertainties that influenced Gold prices. This situation, combined with the US government shutdown extending into a third week, further impacted market conditions.
Interest Rates and Gold
The possibility of interest rate cuts by the Federal Reserve, with a 96% probability for October and 87% for December, also benefits the non-yielding asset. Despite the international context, FXStreet notes Gold prices in India reflect market rates but may slightly differ locally.
Gold holds an inverse relationship with the US Dollar and treasuries. When those assets decline, Gold tends to rise, serving as a hedge in turbulent times. As a non-yield asset, Gold prices also increase during periods of lower interest rates and weak dollar scenarios.
With gold hitting a new all-time high, the market is signaling a clear flight to safety that we must act on. This is being driven by a perfect storm of geopolitical tensions between the US and China, the ongoing war in Ukraine, and instability from the US government shutdown. These factors are creating significant uncertainty, making gold the preferred safe-haven asset for the foreseeable future.
Investment Strategies for Traders
The high probability of Federal Reserve rate cuts in both October and December is adding fuel to this fire. Looking back, we saw a similar pattern in 2019 when the Fed began cutting rates, and gold rallied over 15% in just three months. With the CME FedWatch tool showing a 96% chance of a cut this month, the path of least resistance for gold appears to be upward as a weaker dollar makes the metal more attractive.
For derivative traders, this environment strongly supports bullish strategies on gold in the coming weeks. We should consider buying call options or establishing bull call spreads on gold futures or ETFs like GLD to capitalize on the expected upward momentum with defined risk. The heightened global uncertainty is also pushing up implied volatility, which makes option premiums richer but reflects the real risk in the market.
The US dollar is weakening under the weight of a potential government shutdown, which the Congressional Budget Office estimated in 2019 cost the economy billions. This domestic weakness, combined with the prospect of lower interest rates, reinforces the inverse correlation with gold. Therefore, positions that are long gold and short the US dollar should be considered to capture the full effect of this market dynamic.
Given the multiple catalysts, any dips in the gold price should be viewed as buying opportunities. We can implement strategies like selling cash-secured puts at strike prices we are comfortable owning gold at, allowing us to collect premium while waiting for a potential entry point. However, the primary focus should remain on long positions as long as these geopolitical and monetary pressures persist.
