Gold prices extended their rally on Monday, touching around $4,040 per ounce in early Asian trade, as investors sought safety amid renewed US-China trade tensions. The rise comes after former US President Donald Trump warned of imposing 100% tariffs on Chinese imports starting November 1, a move that has unsettled global markets.
Tariff tension boosts demand for gold
The yellow metal gained strength as market participants turned to safe-haven assets, following Trump’s fresh trade threat. In response, China cautioned the US that it would retaliate if the proposed tariffs take effect.
“Heating up the trade war again will tank the dollar and be good for safe-havens,” said Tai Wong, an independent metals trader.
The renewed trade uncertainty is driving investors away from risk assets such as equities and towards gold, traditionally considered a hedge during economic or geopolitical instability.
Fed rate cut expectations support bullion
Market sentiment is also being influenced by expectations that the US Federal Reserve will cut interest rates by 25 basis points each in October and December. According to the CME FedWatch Tool, there is a 97% probability of a rate cut in October and a 92% chance of another in December.
Lower interest rates generally reduce the opportunity cost of holding non-yielding assets like gold, adding further momentum to its rally.
Market awaits key US data
Traders are now awaiting the release of the US Retail Sales and Producer Price Index (PPI) data on Thursday. Any indication of stronger inflation could strengthen the US Dollar (USD), potentially limiting gains in the USD-denominated commodity.
Analysts note that while gold’s near-term trajectory will hinge on US economic data and monetary policy signals, continued trade tensions could keep the metal well-supported above the $4,000 mark.