Gold broke above the $4,200 mark for the first time on Wednesday as investors continued to seek safer assets amid the deepening US-China trade war and rising expectations of more US rate cuts.
At the time of writing, gold futures had gained 1.5%, to $4,224.40 per ounce, while the spot price had climbed 2% to $4,209.58 per troy ounce, a record high.
“The US government shutdown and dovish comments from Jerome Powell have provided the latest reasons for gold prices to accelerate higher,” said StoneX senior analyst Matt Simpson.
Federal Reserve chair Powell delivered remarks on Tuesday that investors interpreted as dovish.
Powell said the US economy may be on a firmer trajectory than some expected, but cautioned that a notably softer labour market is emerging. He added that there was “no risk-free path” for policy and highlighted that future decisions would be made “meeting by meeting.”
His comments reinforced market expectations of Fed rate cuts in both October and December, sending US Treasury yields lower and weakening the dollar, both supportive for non-yielding bullion.
Read more: London muted and Europe rises as Fed chair Powell hints at US rate cuts
Investors are pricing in a near-certain chance of a 25-basis-point Fed rate cut in both October and December.
The precious metal has seen strong gains for the last eight consecutive weeks, and is set for yet another weekly jump if the rally holds.
“Gold and silver are two of the best-performing commodities this year, with prices up by more than 55% and 80% year to date, respectively, supported by the Fed’s policy easing, the central bank’s purchases and geopolitical tensions, which have fuelled demand for safe-haven assets,” ING analysts said in a note.
Oil prices were in the red in early European trade, extending losses, as investors remained jittery amid warnings of a global supply gut next year alongside escalating US-China trade tensions.
Brent crude futures slipped 0.1% to trade at $62.31 per barrel at the time of writing, while West Texas Intermediate futures were muted at $58.72 a barrel. Both benchmarks closed Tuesday at a five-month low.
The International Energy Agency (IEA) warned that the global oil market could face a surplus of up to 4 million barrels a day next year, driven by rising output from OPEC+ and other producers while demand remains sluggish. Analysts said the combination of oversupply and mixed demand signals is pressuring prices.
Read more: Should you invest in gold?
Adding to market concerns, trade tensions between the United States and China have reignited. China last week expanded its export controls on rare earth metals, which are crucial to AI development, provoking Donald Trump to threaten additional 100% tariffs on China. Beijing has warned that it stands ready to fight any trade war.
Jerome Powell, trade tensions, rising expectations, Federal Reserve, China, trade war, labour market, US rate cuts, gold prices, gold futures
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