Gold hits another record high on US-China trade fears and Fed rate cut expectations

Gold (GC=F)

Gold prices surged to a fresh all-time high on Monday, buoyed by renewed safe-haven demand as US-China trade tensions re-escalated and expectations mounted for further interest rate cuts by the US Federal Reserve.

COMEX - Delayed Quote•USD

(GC=F)

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4,089.10

+88.70

+(2.22%)

As of 4:41:45 AM EDT. Market Open. Advanced Chart

At the time of writing, gold futures gained 2.1%, to $4,086.80 per ounce, while the spot price climbed 1.3% to $4,072.63 per troy ounce, after touching a new peak of $4,078.05 during Asian trading.

The rally came in the wake of US president Donald Trump’s announcement on Friday of sweeping new trade measures against Beijing, including 100% tariffs on all Chinese goods and export controls on critical US-developed software, due to take effect by 1 November. The move was a response to China’s recent restrictions on rare earth exports and specialised equipment, which Beijing defended on Sunday as “justified”, while stopping short of retaliatory tariffs.

Read more: FTSE 100 LIVE: European stocks rise as Trump takes sting out of fresh US-China trade spat

Kyle Rodda, an analyst at Capital.com, said: “Just when geopolitical and trade risks were diminishing tailwinds for gold, we’ve got this flare-up in US-China tensions.”

Bullion has climbed 56% year-to-date, driven by a confluence of geopolitical risk, aggressive central bank buying, strong inflows into gold-backed exchange-traded funds, and deepening expectations of looser US monetary policy.

Markets are now pricing in an almost certain 25 basis-point rate cut at the Fed’s October meeting, with another expected in December, according to the CME FedWatch tool.

Victoria Scholar, head of investment at Interactive Investor, said: "Central bank buying and Fed rate cuts have provided further tailwinds for gold. Silver has also been subject to a short squeeze, extending this year’s rally.

"Then the US government shutdown provides further uncertainty pushing up demand for safety assets. And there’s a feeling that many investors, unsure where to put there money, have been watching gold’s appreciation and have hopped on the bandwagon hoping not to miss out on the latest exciting investment idea."

Oil (BZ=F, CL=F)

Oil prices rose in early European trade, recovering slightly after falling to a five-month low in the previous session. The uptick followed signs that tensions between Washington and Beijing may ease, with market participants cautiously optimistic about potential high-level talks between the leaders of the world’s two largest economies and oil consumers.

NY Mercantile - Delayed Quote•USD

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63.60

+0.87

+(1.39%)

As of 4:41:06 AM EDT. Market Open. BZ=FCL=F

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Brent crude futures rose 1.4% to trade at $63.62 per barrel at the time of writing, while West Texas Intermediate futures gained 1.5% to $59.82 a barrel.

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The rebound came after Trump struck a more conciliatory tone over the weekend, suggesting a deal with Beijing remains possible despite the sharp escalation in tariffs. “It will all be fine,” Trump said, adding that the US “wants to help China” resolve the trade impasse.

"The recovery in oil markets was likely driven by profit-taking, as traders bet on a so-called 'TACO' deal after Trump and vice president JD Vance indicated that recently-announced tariffs are more of a negotiating tool and they are ready to strike a deal with China," independent analyst Tina Teng told Reuters, referring to the market adage that "Trump always chickens out."

Read more: Stocks to watch this week: JPMorgan, TSMC, Infosys, ASML and Bellway

However, Teng warned that volatility was likely to persist. "I don't expect oil or other risky assets to make up for losses anytime soon," she added.

Richard Hunter, head of markets at Interactive Investor, said: "The president’s propensity to shoot from the hip unsettles the investment environment, even though some are already speculating that the TACO trade is alive and well. His subsequent comments on social media over the weekend were decidedly more conciliatory, and at this very early stage, Dow futures are pointing to a brisk recovery which would lessen the blow of Friday’s bruising session."

Pound (GBPUSD=X, GBPEUR=X)

The pound was lower against its major peers as investors flocked to the safe-haven dollar amid rising geopolitical tensions and fears about chancellor Rachel Reeves' upcoming budget.

CCY - Delayed Quote•USD

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1.3323

-0.0031

(-0.23%)

As of 9:51:04 AM GMT+1. Market Open. GBPUSD=XGBPEUR=X

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Sterling fell 0.1% against the greenback to $1.3337 and was down by the same margin against the euro at €1.14989.

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The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, rose 0.1 % to 99.04.

A recent climb in UK gilt yields unsettled markets, rekindling concerns about the government’s fiscal trajectory just weeks before Reeves is due to present her budget. The steeper yield curve was interpreted by investors as a signal that the government's fiscal flexibility may be narrowing, amid doubts about its ability to reconcile economic growth with fiscal discipline.

Sterling also came under pressure as markets scaled back expectations that the Bank of England would hold interest rates steady through 2025, further weighing on the currency against a broadly stronger dollar.

In equities, the FTSE 100 (^FTSE) was higher on Monday morning, up 0.3% to trade at 9,453 points. For more details on market movements, check our live coverage here.

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