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VT 
Gold Prices Approach Key Level
Additionally, Japan’s new leadership under Sanae Takaichi is anticipated to continue policies of fiscal support and relaxed monetary regulation. This change could present both challenges and opportunities for the market.
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The Canadian Ivey PMI data for September was much stronger than anyone expected, showing significant economic expansion. Recent data from Statistics Canada confirms this, showing business capital investment rose 1.2% in the last quarter, its fastest pace since the 2024 slowdown. This strength suggests the Bank of Canada will be in no rush to cut interest rates, creating a tailwind for the Canadian dollar.
However, we must consider the political risks from the United States, specifically the renewed talk of tariffs. To navigate this, we should consider using options rather than trading the spot currency directly. Buying put options on the USD/CAD exchange rate would allow us to profit from a rising Canadian dollar while strictly limiting our potential losses if political headlines cause a reversal.
US Government Shutdown Fears Impact
The ongoing US government shutdown fears are driving significant risk-off sentiment across markets, pushing investors into safe havens. We are seeing this play out as gold approaches the key $4,000 level. We remember how the prolonged shutdown of 2018-2019 caused the VIX, a measure of market volatility, to spike over 30% in just a few weeks.
This environment strongly favors bullish positions in gold, especially with central banks globally increasing their reserves. Reports indicate central banks have already purchased over 800 metric tons of gold this year, providing a solid fundamental reason for its strength. We can use call options on gold futures or ETFs to gain leveraged exposure to this clear upward trend with a defined risk.
A major theme for the coming weeks is the growing divergence in central bank policy. While the strong Canadian data points to a hawkish stance, the Reserve Bank of New Zealand is actively cutting rates and Japan is committed to its ultra-easy monetary policy. This creates clear opportunities for relative value trades between currencies.
Given this divergence, we see a compelling case for a pairs trade, specifically going long the Canadian dollar against the New Zealand dollar. This trade isolates the opposing monetary policies of the two commodity-exporting nations. Using currency futures or options contracts to structure this position would be an effective way to act on this outlook.
