Gold surges past $4,300 an ounce amid Fed rate cut bets and US-China trade uncertainty

Gold prices surged sharply above $4,300 per ounce on Monday (October 20), approaching all-time highs, driven by expectations that the US Federal Reserve will cut interest rates further and by ongoing demand for safe-haven assets. Investors are also closely watching the upcoming US-China trade negotiations and the release of US inflation data later this week.

Spot gold jumped 2.3% to $4,346.39 per ounce at 13:47 Eastern Time (17:46 GMT), while US December gold futures closed up 3.5% at $4,359.40 per ounce. Gold reached a record high of $4,378.69 per ounce on Friday, before closing down 1.8%—the largest drop since mid-May—after remarks from US President Donald Trump eased concerns over US-China trade tensions.

Jeffrey Christian, Managing Partner at CPM Group, said that political and economic worries were pushing prices higher after heavy selling on Friday. He predicts that gold could continue rising in the coming weeks and months, potentially reaching $4,500 per ounce in the near term.

The US government shutdown entered its 20th day on Monday, following the Senate’s tenth failure last week to resolve the impasse. The shutdown has delayed the release of key economic data, leaving investors and policymakers short of information ahead of the Federal Reserve’s policy meeting next week. US consumer price index data, delayed due to the shutdown, is now scheduled for release on Friday.

Investors currently see a 99% chance that the Federal Reserve will cut interest rates next week, with another expected reduction in December. As a non-yielding asset, gold is expected to perform well in a low-interest-rate environment.

Investors are keeping a close watch on developments in the US-China trade negotiations following comments from former President Donald Trump last Friday that planned meetings with Chinese President Xi Jinping will proceed as scheduled.

“Given the current political uncertainty and potential escalation, I would not be surprised to see gold climb to $5,000 per ounce next year,” said Christian, highlighting ongoing geopolitical risks.

Spot silver rose 0.6% to $52.17 per ounce, recovering slightly after a 4.4% drop on Friday, when it briefly reached an all-time high of $54.47 per ounce. Platinum increased 1.9% to $1,640.90 per ounce, while palladium rose 1.5% to $1,496.59 per ounce.

This morning (October 21), Bloomberg reported that spot gold climbed 0.2% to $4,365.68 per ounce at 07:22 Singapore time. The Bloomberg Dollar Spot Index remained stable, with silver edging up slightly, while platinum and palladium fell.

Gold prices are approaching previous record highs, with investors capitalising on last week’s heavy selling to buy during the dip. Bullion traded near $4,365 per ounce after a 3.1% jump in the previous session to $4,381.52. This surge occurred despite easing US-China trade tensions and the prospect of the US government reopening, with technical indicators suggesting that the strong rally initiated in August may be overheating.

On Monday, 10-year US Treasury yields fell amid signs of a crude oil surplus easing inflation concerns ahead of the release of the US September Consumer Price Index on Friday.

Markets have increasingly relied on diverse economic indicators and self-gathered data to compensate for gaps caused by the federal government shutdown that began on October 1. Generally, falling bond yields increase the appeal of gold, which offers no interest, making it an attractive investment in the current environment.