Gold Hits Record High Amid Fed and US-China Interest Rate Signals
Gold surged to a new record high, fueled by escalating US-China tensions and speculation that the Federal Reserve will cut interest rates twice more this year.
Bullion rose to a new peak of $4,186 per ounce. Spot silver prices rallied after a volatile day on Tuesday that saw prices surge to an all-time high above $53.54 per ounce, before falling sharply amid signs that the historic pressure was easing.
US Treasury bond yields fell to their lowest level in weeks on Tuesday, after Fed Chairman Jerome Powell signaled that the US central bank was on track to cut interest rates by another quarter point later this month. Lower yields and borrowing costs tend to benefit precious metals, which pay no interest. Meanwhile, risk-off sentiment swept the market—boosting gold's appeal as a safe-haven asset—after President Donald Trump said he might halt cooking oil trade with China. The comments sparked renewed tensions in relations between the world's two largest economies, with Beijing vowing to retaliate after Washington threatened additional 100% tariffs on China last week.
In silver, the market has been gripped by a lack of liquidity in London, sparking a worldwide rush for the metal and sending benchmark prices soaring above futures in New York. The gap between the two markets narrowed on Tuesday after London prices fell, while silver borrowing costs in the city also began to decline, although both remained at very high levels.
Traders remained nervous ahead of the conclusion of the US government's so-called Section 232 investigation into critical minerals—which includes silver, platinum, and palladium. The investigation has reignited concerns that precious metals could be subject to new tariffs, even after being officially exempted from the levies in April.
The four major precious metals have surged between 58% and 80% this year, in a rally that has dominated commodity markets. Gold's rise has been supported by buying by central banks, increased holdings in exchange-traded funds (ETFs), and the Fed's interest rate cuts.
Demand for safe-haven assets has been fueled by recurring US-China trade tensions, threats to the Fed's independence, and the US government shutdown. Investors have also sought safety in precious metals to protect themselves from the threat posed by runaway budget deficits—a phenomenon known as the "dip trade."
Spot gold traded 0.9% higher at $4,180.83 an ounce as of 9:16 a.m. in Singapore. The Bloomberg Dollar Spot Index was slightly lower. Silver rose more than 1%, along with platinum and palladium. (asd)
Source: Bloomberg
