Insights 
VT 
Gold price climbs to approximately $4,040 during the early Asian session on Monday. Escalating trade tensions between the US and China support the metal’s value. Traders await the US government’s reopening and subsequent data impacting Federal Reserve policy decisions.
Trade Tensions And The Federal Reserve
Trade tensions rise due to President Trump’s new 100% tariffs on Chinese imports effective from November 1. China’s warning of retaliation adds to the economic uncertainty, affecting the dollar and benefiting safe-haven assets like gold. The Federal Reserve is expected to reduce interest rates by 25 basis points in both October and December, with a 97% probability for the October rate cut, per the CME FedWatch tool. These expectations make gold attractive due to reduced opportunity cost.
Key US economic reports such as Retail Sales and Producer Price Index will be released Thursday, potentially impacting the US dollar and gold prices based on inflation readings. Central banks, primarily from emerging economies, continue to hold significant Gold reserves, adding 1,136 tonnes worth $70 billion in 2022.
The price of gold is influenced by geopolitical factors, interest rates, and the behavior of the US dollar. A weaker dollar tends to push gold prices up, while higher interest rates can suppress demand. The article also explains gold’s inverse relation to the US dollar and Treasuries, affecting its demand as a safe-haven asset.
With gold currently trading around $4,040, we see this momentum continuing due to renewed US-China trade friction over technology export controls. Recent data shows the US trade deficit with China widened by 6% in the third quarter of 2025, providing a fundamental reason for the current geopolitical tension. This environment strongly supports safe-haven assets.
The Federal Reserve’s expected policy adds fuel to this fire, as we anticipate a rate cut in the coming months. Market pricing, reflected in the CME FedWatch tool, shows an 85% probability of a 25-basis-point cut at the November 2025 meeting. Weaker monetary policy typically pressures the dollar and boosts non-yielding assets like gold.
Strategies For Traders
For derivative traders, this suggests positioning for further upside in the coming weeks. Long call options or bull call spreads could be effective strategies to capitalize on expected price increases while managing risk. Implied volatility in gold options has risen to 22, reflecting the market’s anticipation of significant price movement.
Looking back, we remember how similar trade disputes in the late 2010s repeatedly caused spikes in the gold price, as investors fled riskier assets for safety. History shows us that these geopolitical standoffs often have a prolonged effect, creating a sustained bid for gold. The current situation feels very familiar and provides a clear historical pattern to follow.
Underpinning this rally is the relentless purchasing by global central banks, which provides a strong floor for the price. Reports from the World Gold Council confirm that central banks have added another 800 tonnes through the third quarter of 2025, continuing the strong trend we saw back in 2022. This consistent demand limits the potential for any significant price declines.
This week, we will be closely watching the US Producer Price Index (PPI) data due on Thursday. Any indication of cooling inflation will reinforce the market’s expectation for a Fed rate cut and could serve as the next catalyst to push gold higher. A soft PPI reading would likely weaken the US dollar and benefit gold directly.
