Gold Rallies as Geopolitical Tensions EscalatedCOMEX: 1-Ounce Gold Futures ( COMEX:1OZ1! )
Without warning, the music at the Wall Street merry-go-round suddenly stops.
On Thursday, October 9th, China’s Commerce Ministry issues a directive, requiring foreign suppliers to obtain approval to export products with rare-earth materials originating from China if they account for 0.1% or more of the good’s total value. Goods produced with certain technologies from China are also subject to the export controls. Both restrictions apply to products manufactured outside of China.
The next day, US President Donald Trump immediately retaliates with a 100% additional tariff for goods imported from China, starting Nov. 1st. He indicated in a social-media post that the duties will come on top of 30% imposed this year on China, as well as tariffs in place on many Chinese goods before the year started.
Prior to Trump’s comments, US stocks were rising sizably on Friday, with the Nasdaq Composite hitting a new all-time intraday high. The TruthSocial post, sent an hour before market close, immediately set off a broad market selloff. At the end of the day, the Dow Jones Industrial Average closes down 878.82 points, or 1.9%, at 45,479.60. The S&P 500 lost 2.71% to settle at 6,552.51, while the Nasdaq Composite fell 3.56% to 22,204.43. The broad-based index’s decline was the largest since April 10th.
While the market is under stress, we have witnessed a classic case of flight-to-safety. At the same time when stocks and cryptos slide, gold pops back up above $4,000 again and settles at $4,035.5 an ounce, up $62.9 or +1.58% for the day. Gold futures contracts also rally with large trade volume.
• The lead contract GCZ5 for benchmark COMEX Gold (100 oz) closes at 4,035.5 with a daily volume of 352,500. In notional terms, the transaction value is $142.2 billion, equivalent to 1,096.4 tons of gold.
• The lead contract GOZ5 for E-Mini Gold (50 oz) closes at 4,036 with a volume of 9,555. Notional value is $1.9 billion, equivalent to 14.9 tons of gold.
• The lead contract MGCZ5 for Micro Gold (10 oz) closes at 4,036.2 with a volume of 640,430. Notional value is $25.8 billion, equivalent to 199.2 tons of gold.
• The lead contract 1OZZ5 for 1-ounce Gold closes at 4,036.75 with a volume of 61,886.
Notional value is $250 million, equivalent to 1.9 tons of gold.
Here are the key reasons supporting the record high prices:
• Economic Uncertainty: Widespread concern about a potential U.S. recession and a shifting global economic order fueled demand for gold as a safe-haven asset.
• Lower Interest Rates: Investors expect the Federal Reserve to cut interest rates, making non-yielding assets like gold more attractive compared to bonds and other investments.
• Geopolitical Instability: A combination of global events, including a prolonged U.S. government shutdown and heightened trade tensions, contributed to a general sense of unease, driving investors to gold.
• Central Bank Purchases: Record buying by central banks has also supported the price of gold.
• Weak Dollar: The Dollar Index is at 99.336, down 8.8% year-to-date. Weak dollar is bullish for all commodities. Global investors pay less to buy gold when they convert local currency into dollar.
What is so significant about the current gold rally?
• The 2025 surge in gold prices has outpaced major past rallies, including those during the 2007-09 recession and the pandemic.
• The move above $4,000 an ounce marks a historic moment, signifying a significant rush into alternative assets amid economic fears.
On April 28th, I published “The Gold-Silver Ratio Explained” on TradingView. At the time, the Ratio was 100 with gold at $3,330 and silver at $33.0.
On October 10th, spot gold is quoted at $4,035.5 while silver is quoted at $47.52. This gives the Gold-Silver Ratio at 84.9. Judging from this important benchmark, gold prices are less extreme than six months ago, even though the price is $700 higher.
Trade Setup with 1-Ounce Gold Futures
Futures market shows bullish sentiment on gold. CFTC’s Commitments of Traders report shows that, as of September 23rd, COMEX gold futures ( CSE:GC ) have total open interest (OI) of 528,789 contracts.
• “Managed Money” holds 198,826 Long contracts, 38,277 Short contracts, and 32,516 contracts at spread positions.
• The long/short ratio of 5.2-to-1 shows that “Smart Money” is very bullish on gold.
Traders who share the bullish view could explore the new 1-ounce gold futures ($1OZ). This pocket-size product is a new way to trade in the gold market, representing just 1/10 the size of a Micro Gold (MGC) futures contract and 1/100 of a Gold (GC) futures contract, making it accessible to all gold traders.
With an initial margin of just $180, traders could gain full exposure to 1 ounce of gold. As of October 11th, the February 2026 contract (1OZG6) is quoted at 4066.75.
Hypothetically, if gold prices move up by 5%, a long futures position would more than double in value (= (4066.75*0.05) / 180 = 113%). This futures contract has a built-in leverage of 22.6:1.
For comparison, owning physical gold has a return of just 5% if gold prices go up by 5%.
The risk of buying gold futures is falling gold prices. Traders could set up a stoploss on their buy order. For illustration, a stoploss at 3,900 would set the maximum loss at $166.75 (= 4066.75–3900). This is below the $180 initial margin.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
