Gold Hits Record $4,070 as US-China Tensions Flare and Fed Rate Cuts Loom

Gold futures surged to a record $4,070 an ounce in New York on Monday, as investors flocked to the haven asset amid renewed US-China trade frictions, a protracted US government shutdown, and growing bets on aggressive Federal Reserve rate cuts.

The yellow metal has rallied more than 50% this year, outpacing most major asset classes as geopolitical risks and economic headwinds drive demand. Spot gold rose 2.3% to close at $4,065.20, extending a five-session winning streak, Bloomberg data show.

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Trade War Redux

The surge accelerated after President Donald Trump on Friday vowed to impose 100% tariffs on Chinese exports and introduce new controls on critical software shipments starting Nov. 1. The threats revived memories of the 2018–2019 trade war that rattled global markets.

Over the weekend, Trump struck a more conciliatory tone, telling reporters that the US “wants to help China, not harm it.” Still, Beijing pushed back, defending its restrictions on rare earth exports — vital for tech and defense industries — and signaling readiness for retaliatory measures against any new US duties.

“China will take all necessary countermeasures to firmly safeguard its legitimate rights and interests,” a Foreign Ministry spokesperson said in a statement, without providing specifics.

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Shutdown Stalemate

Adding to the uncertainty, the US government shutdown entered its second week, with the White House moving ahead with furloughs of federal employees. The budget impasse has disrupted services and raised concerns about a broader economic fallout, including delayed data releases that could cloud the Fed’s policy outlook.

Economists warn that a prolonged shutdown could trim as much as 0.2 percentage points from quarterly GDP growth for each week it persists, based on historical precedents.

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Rate Cut Expectations

Traders are now pricing in a near-certain 25 basis-point cut at the Fed’s next meeting, with futures implying similar reductions at subsequent gatherings this year. Lower rates typically boost non-yielding assets like gold by reducing the opportunity cost of holding them.

Fed Chair Jerome Powell said the central bank is “monitoring the situation closely,” but stopped short of committing to a policy path, amid softening labor data and inflation that remains below target.

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Geopolitical Tailwinds

On the international front, Trump said Sunday that the Gaza conflict had ended, ahead of a visit to Israel for a ceremony marking the release of hostages. The development could ease Middle East tensions, though analysts say lingering instability continues to underpin gold’s appeal as a hedge.

Other precious metals followed suit, with silver jumping 3.1% to $48.50 an ounce, its highest level since 2011.

Gold’s breakout above $4,000 underscores its role as a barometer of global anxiety, with holdings in exchange-traded funds backed by the metal swelling to record levels. Still, some strategists caution that a rapid de-escalation in trade talks or a Fed pause could trigger a pullback.