Gold extends record rally as US-China trade tensions rattle markets
- Gold hits a new all-time high near $4,085 on Monday, extending its rally for a ninth consecutive week as safe-haven demand stays firm.
- The US government shutdown is heading into its third week, with federal layoffs confirmed and no Senate votes scheduled due to the Columbus Day holiday.
- XAU/USD technicals remain bullish above $4,059 support, with the next target seen at $4,100 and beyond.
Gold (XAU/USD) continues its record-breaking rally on Monday, setting fresh all-time highs around $4,085 as fears of a revived US-China trade war boosts safe-haven demand. At the time of writing, XAU/USD is trading around $4,078, up nearly 1.50% on the day, as the metal pushes deeper into uncharted territory and extends its winning streak for a ninth consecutive week.
Escalating trade frictions rippled through global markets late Friday after US President Donald Trump stunned investors by announcing plans to impose 100% tariffs on all Chinese imports starting November 1. The move followed China’s new export controls on rare earth elements, raising concerns about potential global supply disruptions. Some hopes of negotiation over the weekend helped calm nerves, but sentiment remains cautious.
Beyond trade headlines, market sentiment continues to favor the upside for Gold as investors hedge against growing economic and political risks. Prospects of two more interest rate cuts by the Federal Reserve (Fed) this year have kept Treasury yields subdued and provided a steady tailwind for Bullion. Meanwhile, the Russia-Ukraine conflict and the extended United States (US) government shutdown keep safe-haven flows tilted toward Gold.
Market movers: Shutdown fallout builds, markets eye Powell, China unrest grows
- In a Truth Social post on Friday, President Donald Trump accused China of becoming “very hostile,” claiming Beijing had sent letters to multiple countries outlining plans to impose export controls on rare earth elements and other critical materials. Over the weekend, Trump adopted a softer tone, saying, “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment… The U.S.A. wants to help China, not hurt it!” Meanwhile, US Vice President J.D. Vance said the administration “holds far more cards than Beijing” in the escalating dispute, but added that Washington remains open to dialogue if China “chooses the path of reason.”
- On Sunday, China’s Commerce Ministry warned that “If the US persists in its own course, China will resolutely take corresponding measures to safeguard its legitimate rights and interests.”
- The US government shutdown entered its 13th day on Monday, as lawmakers remain deadlocked over a stopgap funding bill to reopen federal agencies. The Office of Management and Budget (OMB) confirmed on Friday that federal employee layoffs have begun, while no discussions or votes are scheduled for Monday due to the Columbus Day holiday. The Senate is expected to resume votes after the holiday.
- The US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major peers, climbs toward 99.00 on Monday, recovering ground lost on Friday after President Donald Trump softened his stance on imposing sweeping tariffs against China. Meanwhile, US Treasury yields remain under pressure across the curve, with the 10-year yield slipping 7.7 basis points to 4.059% and the 30-year yield falling 7.9 basis points to 4.641%, both at their lowest levels in nearly four weeks.
- No US economic data releases are due Monday, though Philadelphia Fed’s Governor Anna Paulson is set to speak later in the day. Fed Chair Jerome Powell’s remarks on Tuesday will take center stage before the central bank enters its blackout period ahead of the October 29-30 meeting. The Consumer Price Index (CPI) report, initially scheduled for Wednesday, has been postponed to October 24 due to the shutdown, while several other Fed officials are slated to speak through the week.
Technical analysis: XAU/USD targets $4,100 as uptrend strengthens
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XAU/USD extends its upward momentum at the start of the week, breaking decisively above the previous all-time high at $4,059 set on Wednesday. The breakout confirms bullish continuation, with the former resistance now turning into immediate support, followed by the 21-period Simple Moving Average (SMA) on the 4-hour chart near $4,020. A more substantial support zone sits around $3,950-$3,960, where the 50-SMA coincides with the lower boundary of recent consolidation.
Momentum indicators remain constructive, with the Relative Strength Index (RSI) climbing toward 70 after rebounding from neutral territory, signaling sustained buying interest. The path of least resistance remains to the upside, with bulls eyeing $4,100 as the next psychological target and potential extensions toward $4,120-$4,150 if upward pressure persists. Only a move back below $3,950 would begin to challenge the near-term bullish structure.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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