Author: Olumide Adesina

Gold reached a record high as demand surged due to increased tensions between the US and China, along with speculation that the Federal Reserve would continue to ease monetary policy through the end of the year.

Bullion’s rapid rally, which began in mid-August, has led to a rise of more than 5% this week, peaking above $4,242 per ounce on Thursday.

Spot gold was up 0.6%, reaching $4,232.98 per ounce, while silver prices remained unchanged. The Dollar Spot Index dipped 0.1% for the third consecutive day. Although palladium prices increased, platinum remained flat.

Fed Chair Jerome Powell indicated this week that the central bank is on track to deliver another quarter-point reduction later this month, fueling traders’ expectations for at least one significant US rate cut by year-end. Precious metals typically benefit from lower borrowing costs since they do not pay interest.

Treasury Secretary Scott Bessent suggested that a longer pause should be considered before increasing tariffs.. However, President Donald Trump announced that the United States is now engaged in a trade war with China, raising concerns about potential long-term damage to the global economy.

This situation could increase gold’s appeal as a safe-haven asset. Additionally, the ongoing U.S. government shutdown and the so-called “debasement trade”—in which investors move away from sovereign debt and currencies to protect themselves from unsustainable budget deficits—have also contributed to rising gold prices.

Another key factor contributing to the over 60% increase in gold prices this year has been significant purchasing by central banks. Analysts Soni Kumari and Daniel Hynes noted that anticipated rate cuts are fueling gold’s “extraordinary rally,” which is still ongoing. They have raised their price predictions for gold to $4,400 per ounce by the end of the year, with a potential peak of around $4,600 expected by June 2026.

The bullion asset continued its remarkable rise to a new all-time high, surpassing $4,200 as markets assess the latest news regarding US-China relations.

Gold has continued its rally for the third consecutive session, starting the week with a strong bullish momentum and rising more than 4 percent in recent days. Renewed trade tensions between the United States and China have fueled consistent demand for gold as a crucial safe-haven asset, and buying pressure remains strong. In the upcoming sessions, bullish momentum may become even more pronounced on the chart as these tensions escalate. Last week’s final session marked a significant turning point for market risk sentiment.

The Chinese government was found to have obstructed the export of rare earth minerals, which are vital to the United States. In response, the U.S. announced tariffs of up to 100 percent on certain Chinese imports. It has implemented tariffs on ships coming from the U.S. and has begun banning subsidiaries connected to U.S. companies, while China has not retaliated directly against these tariffs.

The actions announced by the Trump administration are scheduled to take effect on November 1st, but if no early agreements are reached, both parties may further increase tariff levels.

The upcoming weeks will be critical in determining whether the two largest economies in the world are on the verge of a new trade war, especially since there have been no tangible negotiations to ease tensions thus far.

The potential effects on the global economy toward the end of the year remain uncertain, contributing to a surge of economic instability due to the resurgence of trade hostilities. This has led to capital flowing out of riskier assets, particularly U.S. stocks, as investors seek safe-haven assets like gold.

Equities have become increasingly volatile. In times of market turbulence, gold tends to reaffirm its position as the premier safe-haven asset, drawing steady short-term demand. Even before the recent trade dispute, the volume of gold futures trading had been rising steadily, reaching levels not seen since early September, with over 500,000 contracts traded.

Open interest—an indicator of all outstanding futures positions—remains stable at approximately 485,000 contracts, indicating no significant capital outflows. This supports the ongoing bullish trend for gold and underscores the demand for gold futures. Trading volume is expected to increase if trade tensions continue to escalate.