Gold prices rose to a new record high on Monday, buoyed by renewed safe-haven demand as trade tensions between the US and China escalated again and expectations of further interest rate cuts by the US Federal Reserve increased.
At the time of writing, gold futures rose 2.1% to $4,086.80 per ounce, while spot prices rose 1.3% to $4,072.63 per troy ounce, after hitting a fresh high of $4,078.05 in 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 crucial US-developed software, to take effect on November 1.
The move was in response to China’s recent restrictions on exports of rare earths and specialized equipment, which Beijing on Sunday defended as “justified” while not imposing retaliatory tariffs.
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Kyle Rodda, analyst at Capital.com, said: “Just as geopolitical and trade risks reduced the tailwind for gold, we saw a flare-up in US-China tensions.”
The precious metal is up 56% this year, driven by a confluence of geopolitical risks, aggressive central bank buying, strong inflows into gold-backed exchange-traded funds and rising expectations of looser monetary policy in the US.
According to CME’s FedWatch tool, markets are pricing in an almost certain 25 basis point rate cut at the Fed’s October meeting, with another expected in December.
Victoria Scholar, head of investments at Interactive Investor, said: “Central bank buying and Fed rate cuts have further hurt gold. Silver also suffered a short squeeze, extending this year’s rally.
“Then the US government shutdown creates even more uncertainty, driving up demand for security assets. And there is a sense that many investors, unsure where to put their money, have watched gold’s appreciation and jumped on the bandwagon hoping not to miss the latest exciting investment idea.”
Oil prices rose in early European trading, recovering slightly after falling to a five-month low in the previous session. The rebound followed signs that tensions between Washington and Beijing could be easing, with market participants cautiously optimistic about possible high-level talks between the leaders of the world’s two largest economies and oil consumers.
Brent crude futures rose 1.4% to $63.62 per barrel at the time of writing, while West Texas Intermediate futures rose 1.5% to $59.82 per barrel.
The rebound came after Trump took a more conciliatory tone this weekend, suggesting a deal with Beijing remains possible despite the sharp escalation in tariffs. “It will all work out,” Trump said, adding that the US wants to “help China” break 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 signaled that recently announced tariffs are more of a negotiating tool and that they are willing to make a deal with China,” independent analyst Tina Teng told Reuters, referring to the market adage that “Trump always gets goosebumps.”
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However, Teng warned that volatility was likely to persist. “I don’t expect oil or other risky assets to make up for the losses anytime soon,” she added.
Richard Hunter, head of markets at Interactive Investor, said: “The president’s tendency to shoot from the hip is roiling the investment climate, even as some are already speculating that TACO trading 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 strong recovery that would soften the blow of Friday’s tough session.”
The pound was lower against its key peers as investors flocked to the safe-haven dollar amid rising geopolitical tensions and fears over Chancellor Rachel Reeves’ upcoming budget.
Pound sterling fell 0.1% against the dollar to $1.3337 and fell by the same margin against the euro to €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 rise in UK government bonds is roiling markets, rekindling concerns about the government’s budget path just weeks before Reeves is due to present her budget. The steepening yield curve was interpreted by investors as a signal that the government’s fiscal flexibility may be tightening 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 keep interest rates stable through 2025, further weighing on the currency against a broadly stronger dollar.
In shares, the FTSE 100 (^FTSE) was higher on Monday morning, up 0.3%, trading at 9,453 points. For more details on market movements, watch our live coverage here.
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