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Gold crosses $4200 for the first time due to Fed rate-cut betting and US-China trade worries

Gold crosses $4200 for the first time due to Fed rate-cut betting and US-China trade worries

Gold reached the $4,200 per ounce mark for the first ever time on Wednesday. This was boosted by expectations of more U.S. interest rate cuts. Meanwhile, renewed U.S. China trade concerns also increased demand for safe haven assets.

As of 0659 GMT, spot gold rose 1.4% to $4,200.11 an ounce. U.S. Gold Futures for December Delivery gained 1.3%, to $4218.0.

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

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 against 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 are political and economic uncertainties.

Gold has gained 59% in the past year, 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 is considering cutting off some trade relations with China, such as in the cooking oil sector. On Tuesday, both countries started imposing port fees based on a tit-fortat system.

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 climbed 2% to $52.48 after hitting a record of $53.60 Tuesday. This was due to the gold rally and tightening supply on the spot market.

Palladium increased 0.9% and platinum rose 1.3%. (Reporting and editing by Sherry Phillips, Subhranshu Sahu and Ishaan Aroo in Bengaluru).

(source: Reuters)