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Gold reaches record highs on Fed rate-cut betting, US-China Trade woes

Gold reaches record highs on Fed rate-cut betting, US-China Trade woes

Gold reached a new high on Wednesday just below the $4,200 per ounce mark, boosted by expectations for further U.S. interest rate cuts. Meanwhile, renewed U.S. China trade concerns also increased demand for safe havens.

As of 0252 GMT the spot gold price was up 0.8% to $4,173.56 an ounce after reaching a session high of 4,186.68. U.S. Gold Futures for December Delivery gained 0.7%, to $4192.90.

The U.S. president Donald Trump announced on Tuesday that his administration would produce a list of "Democrat programs" on Friday, which will be closed due to the federal government shutdown.

Matt Simpson, senior analyst at StoneX, said that the U.S. shutdown and Jerome Powell's dovish remarks have been two of the most recent reasons why gold prices are on an upward trend.

Federal Reserve Chair Jerome Powell stated that the U.S. labor market was subdued. However, the economy may be "on a slightly firmer trajectory than anticipated."

Powell said that interest rate decisions will be taken "meeting by meeting", balancing the labour market's weakness and persistent inflation above the target.

Investors have priced in the near certainty of a Fed rate cut of 25 basis points in October and December.

Bullion is more likely to perform well when interest rates are low and there is political and economic uncertainty.

Gold has risen 59% in value year-to date, mainly due to geopolitical and financial uncertainties, central bank purchases, the de-dollarisation of currencies and strong exchange-traded funds.

Simpson added that "this rally has become a momentum trading, where traders pile into the market to chase away prices."

Trump stated that Washington would consider cutting off some trade relations with China, such as in the area of cooking oil. On Tuesday, both countries started imposing port fees tit for tat.

The International Monetary Fund increased its global growth forecast for 2025, citing better than expected tariff and financial conditions. However, it warned that renewed U.S. China trade tensions may curb growth.

Silver increased 0.3% to $51.60 after hitting a record of $53.60 Tuesday. This was due to the gold rally and tightening of supply on the spot market.

Palladium and platinum both rose by 0.2%, to $1,528.50. (Reporting and editing by Sherry Phillips, Subhranshu Sahu and Ishaan Aroo in Bengaluru).

(source: Reuters)