Gold Price Climbs to Record High Amid US-China Trade Tensions and Fed Rate-Cut Expectations

Gold price climbs to record high as rising tensions between the United States and China, coupled with growing expectations of further US Federal Reserve rate cuts, have fueled global demand for safe-haven assets. The rally marks one of the strongest surges in bullion prices seen in recent years.

As of Thursday, spot gold prices in Singapore were up by 0.3%, trading at $4,218.74 per ounce, while the Bloomberg Dollar Spot Index slipped 0.2%, marking its third consecutive day of decline. Other precious metals followed suit, with platinum holding steady and palladium posting modest gains.

Global gold rally driven by uncertainty

The gold market has gained nearly 5% this week alone, touching a new record of $4,227 per ounce, extending a powerful rally that began in mid-August. Traders and investors are increasingly viewing gold as a hedge against rising geopolitical tensions and financial uncertainty.

Meanwhile, the silver market is witnessing a sharp liquidity crunch in London, causing a worldwide rush for the metal. Benchmark silver prices briefly surpassed $53 an ounce this week — a record level — before stabilising on Thursday.

Fed policy and Trump’s declaration fuel market reactions

Market analysts attribute the surge in gold prices largely to expectations that the US Federal Reserve will continue cutting interest rates through the end of the year. Traders are now betting on at least one significant rate cut before December, following Fed Chair Jerome Powell’s recent signal of a potential quarter-point reduction later this month.

Lower interest rates generally boost demand for gold, as the metal does not yield interest but benefits from a weaker dollar and lower bond returns.

Adding fuel to the fire, former US President Donald Trump formally declared a “US-China trade war”, sparking renewed fears of global economic slowdown. While US Treasury Secretary Scott Bessent hinted at a possible pause in further tariff hikes, markets remain nervous about the prolonged impact of trade disputes on global growth and inflation.

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Central banks and investors drive gold demand

The ongoing US government shutdown has further boosted bullion’s appeal, as investors increasingly move away from sovereign debt and the dollar amid concerns over widening fiscal deficits. Experts call this the “debasement trade”, where investors prefer tangible assets like gold to protect themselves against potential inflation and currency erosion.

“Much of the current rally is being driven by physical gold buying, especially from central banks,” said Saad Rahim, Chief Economist at Trafigura Group. “Fears of debt sustainability and the prospect of lower rates have investors looking to gold as a store of value and safety.”

According to market data, central bank purchases of gold have surged by more than 60% this year, highlighting the shift in global investment sentiment from riskier assets to precious metals.

India’s gold market outlook

India remains the second-largest consumer of gold in the world, after China. The country’s domestic demand is primarily met through imports and locally recycled bullion. Therefore, apart from international market trends — where prices are denominated in US dollars — import duties, local taxes, and currency exchange rates significantly affect gold prices in Indian cities.

Gold has long been considered a reliable hedge against inflation, though its prices also fluctuate based on bond yields and the dollar’s performance. With global volatility expected to persist, analysts anticipate that gold may continue to hold above its recent highs in the coming weeks.

Here are the latest gold prices in major Indian cities for reference.

The ongoing mix of US-China trade tensions, potential Fed rate cuts, and sustained central bank buying suggests that gold’s upward momentum may continue in the near term. Investors worldwide are closely watching upcoming Fed policy announcements and trade developments, which are likely to determine whether the precious metal will extend its record-breaking run further.