Gold Nears Record High as Fed Rate Cut Expectations and US-China Trade Tensions Boost Safe-Haven Demand

Gold (XAU/USD) drew buyers on Thursday, climbing to around $4,210 in early Asian trade, approaching fresh all-time highs. The rally is being driven by expectations of US interest rate cuts and renewed trade tensions between the US and China, which have increased demand for safe-haven assets.

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Fed Rate Cut Prospects Support Gold

Traders are closely watching comments from Federal Reserve policymakers Michael Barr, Stephen Miran, Christopher Waller, and Michelle Bowman later today for signals on the central bank’s interest rate path.

Fed Chair Jerome Powell earlier indicated that a slowdown in hiring poses growing risks to the US economy, pointing to potential rate reductions later this year. Markets currently price in a 25 basis points cut in October, another in December, and three further reductions in 2026, according to LSEG data.

Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, providing a tailwind for the metal’s price.

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Trade Tensions Drive Safe-Haven Demand

Rising friction between the US and China is also supporting gold. Both nations have imposed additional port fees on cargo shipments, raising trade costs and disrupting freight flows. The US began collecting these fees on October 14.

Analyst Fawad Razaqzada of City Index and FOREX.com told Reuters, “With US-China trade tensions being reignited in the last few days, investors have even more reason to hedge their long equity bets by diversifying into gold.”

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Gold’s Role as a Safe-Haven and Hedge

Gold’s appeal extends beyond its traditional use in jewelry:

• It is widely regarded as a safe-haven asset, protecting wealth during economic or geopolitical turbulence.

• It serves as a hedge against inflation and currency depreciation.

• Central banks are major holders of gold; in 2022, they collectively purchased 1,136 tonnes (~$70 billion), the largest annual addition on record. Emerging economies such as China, India, and Turkey are rapidly increasing reserves.

Gold is inversely correlated with the US Dollar and risk assets. A stronger dollar tends to weigh on gold prices, while sell-offs in equities or weaker dollar trends favor the metal. Geopolitical instability, recession fears, or falling interest rates can trigger sharp price rallies.

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Market Outlook

Investors are awaiting Fedspeak later Thursday for hints on the US monetary policy trajectory. Hawkish remarks could temporarily strengthen the USD and cap gold gains, while dovish signals could push the yellow metal higher.