Insights 
VT 
Gold prices have eased below record highs after reaching $4,179. This comes amid trade tensions between the US and China, with China imposing new port fees on US-linked ships and sanctioning US subsidiaries of Hanwha Ocean.
Despite a brief intraday drop to $4,090, gold remains near $4,125. Traders are taking profit after an extended rally, but concerns over the US-China trade standoff continue to influence market sentiment.
Gold Rally Continues
Gold’s rally persists, with prices rising over 50% this year, expected to be the best yearly gain since 1979. Factors contributing include potential interest rate cuts by the Federal Reserve, geopolitical tensions, and central bank purchases.
US-China trade tensions are escalating, now affecting the maritime sector. China’s new port fees on US-linked ships follow similar US measures, affecting trade flows. China also sanctioned Hanwha Ocean’s US subsidiaries for supporting investigations against Beijing’s interests.
In France, political attention focuses on Prime Minister Sébastien Lecornu’s swift reappointment and budget plans amid potential confidence motions from opposition parties. Japan faces political uncertainty after the breakup of the Liberal Democratic Party and Komeito coalition.
In the US, the ongoing government shutdown enters its third week. Fed Chair Jerome Powell’s upcoming remarks at the NABE Annual Meeting are anticipated, with expectations of insights into the Fed’s rate-cut path.
Volatility Plays and Positioning
With gold consolidating just below its all-time high, the immediate focus for us is on volatility plays ahead of Jerome Powell’s remarks. Given the sharp run-up, implied volatility is elevated, with the Cboe Gold ETF Volatility Index (GVZ) trading near 18. This suggests that buying November 2025 call options with a strike price around $4,200 offers a defined-risk way to capture the next potential leg up.
The underlying bullish trend is supported by overwhelming fundamental factors that show no signs of easing in the coming weeks. We’ve seen net inflows into gold-backed ETFs exceed $40 billion year-to-date, a pace reminiscent of the major risk-off environment we saw back in 2020. This persistent demand from investors is creating a strong floor under the market, making any significant pullback unlikely.
Furthermore, central bank buying continues at a historic pace, providing another layer of support for gold prices. Purchases are on track to surpass the record 1,082 tonnes we witnessed in 2022, as nations diversify away from the dollar amid ongoing geopolitical frictions. This institutional demand suggests that dips toward the $4,100 level will continue to be viewed as strong buying opportunities.
The Federal Reserve’s dovish stance is the primary driver, and we should position for confirmation of this from Powell. With the latest September CPI data coming in at just 2.1%, the Fed has a clear justification for the two additional rate cuts priced in by year-end. We should therefore watch for any language that reinforces this path, which would likely trigger a break above the recent highs.
Geopolitical risks are also escalating, making gold derivatives a crucial hedging instrument for any portfolio. The deepening US-China trade spat, a prolonged US government shutdown, and political instability in allied nations like France and Japan create a backdrop of uncertainty. Holding long gold futures or calls acts as a direct hedge against these unfolding global risks.
From a tactical perspective, we are watching the $4,090 intraday low as a key level for initiating new positions. A successful defense of this area would signal that the current pullback is merely profit-taking before the next move higher. Scaling into long futures contracts or bull call spreads on any weakness toward this support zone seems to be the most prudent strategy for the coming weeks.
