In the early Asian trading session on Monday (October 13), spot gold continued to rise, surging by 1% at one point to reach a historic high of $4,059.87 per ounce, surpassing last Wednesday’s record of $4,059.05. Heightened international trade tensions, escalating geopolitical risks, expectations of Federal Reserve interest rate cuts, and political instability in multiple countries have collectively fueled sustained demand for gold as a safe-haven asset. As a non-yielding asset, gold once again demonstrated its role as the “ultimate safe haven” amid widespread uncertainty in global markets.
Escalation of International Trade Tensions: Gold’s Safe-Haven Status
The renewed intensification of international trade frictions has emerged as the primary driver behind gold prices breaking historical highs.
Last week, U.S. President Trump responded fiercely to China’s export controls on critical items such as rare earths, publicly threatening to impose a 100% tariff on Chinese goods and implement export restrictions on all key software. This aggressive stance directly triggered market panic, causing the U.S. dollar index to drop by 0.5% to 98.82 on Friday. The weakening of the dollar further reduced the cost for overseas buyers purchasing gold priced in dollars.
Independent metals trader Tai Wong pointed out incisively that the escalation of the trade war will weigh on the dollar, thereby benefiting safe-haven assets.
Historically, gold often stands out during periods of heightened trade uncertainty. Since the U.S. imposed tariffs in April this year, gold prices have surged by 52%. This is no coincidence but rather an intuitive reaction from investors to the confrontation between the world’s two largest economies.
A spokesperson for China’s Ministry of Commerce responded by stating that the U.S. actions represent a typical case of “double standards,” further highlighting the complexity and persistence of trade disputes. Against this backdrop, gold is no longer merely a commodity but has become a choice for global capital seeking refuge. Each escalation of the trade war acts as a catalyst, amplifying its appeal.
Geopolitical Risks Intensify: Russia-Ukraine Conflict and Global Uncertainty
In addition to trade factors, the ongoing escalation of geopolitical tensions has also provided solid support for gold prices. The Russia-Ukraine conflict has once again come into focus, with U.S. President Trump stating during his flight to Israel that if the conflict cannot be resolved, he might provide Ukraine with “Tomahawk” missiles. These remarks not only raised expectations regarding Ukraine’s military capabilities but also directly heightened the risk of U.S.-Russia confrontation.
Trump emphasized Ukraine’s desire to obtain such advanced weapons, which will undoubtedly alert Russian President Putin and further exacerbate global geopolitical uncertainty.
Meanwhile, the fragile peace in the Middle East and the drone and missile attacks on Ukraine have also heightened investor concerns about a broader escalation of conflict. As a traditional safe-haven asset, gold always benefits from such events because it is not directly affected by political or military turmoil.
Analyst Alex Kuptsikevich emphasized that when currencies and equities depend on government actions, precious metals can remain independent, a characteristic that is particularly valuable in the current environment.
The accumulation of geopolitical risks has not only stimulated strong central bank purchases of gold and inflows into exchange-traded funds but also kept gold prices robust in the short term.
Fed Rate Cut Expectations: A Catalyst for Gold
The shift in the Federal Reserve’s monetary policy is another major driver of gold price increases. The market broadly expects the Fed to cut rates by 25 basis points each in October and December. According to the CME Group’s FedWatch tool, the probability of an October rate cut is as high as 97%, with a 92% chance of another cut in December. This easing expectation directly weakens the appeal of the US dollar, driving investors toward gold.
St. Louis Fed President Musalem stated that there may be one more rate cut to support the labor market, but caution is required as inflation remains significantly above the 2% target.
Fed Governor Waller pointed out that private data indicates a weakening job market, providing grounds for further rate cuts, but adjustments will remain at 25 basis points. This cautious rate-cutting path, while not triggering sharp inflation, is sufficient to allow non-yielding gold to shine in a low-interest-rate environment.
Moreover, the US government shutdown has entered its tenth day, halting the release of key economic data, further amplifying uncertainty. Although the University of Michigan Consumer Sentiment Survey was slightly higher than expected, it still declined for the third consecutive month in October, intensifying concerns about a weakening labor market. During a rate-cut cycle, gold historically performs exceptionally well as it hedges against inflation risks and economic slowdowns.
US Bond and Stock Market Turmoil: Investors Shift Toward Gold
The sharp volatility in the U.S. bond and stock markets has further highlighted gold’s appeal as a safe-haven asset. Following Trump’s threat to impose additional tariffs on China, U.S. Treasury yields plummeted to multi-week lows. The 10-year yield fell 9.1 basis points to 4.057% during the session, marking its lowest level since mid-September; the 30-year yield dropped 9.6 basis points to 4.637%; and the two-year yield declined 7.5 basis points to 3.512%. The spread between the two-year and 10-year yields narrowed to 52.8 basis points, reflecting deepening concerns over the economic outlook as investors flocked to safe-haven assets.
In the stock market, all three major indices tumbled sharply last Friday. The Dow Jones Industrial Average fell 1.90% to 45,479.60 points, the S&P 500 plunged 2.71% to 6,552.51 points, and the Nasdaq Composite dropped 3.56% to 22,204.43 points. This marked the largest single-day decline since April, with weekly performance hitting its worst record in months.
Ryan Detrick, Chief Market Strategist at Carson Group, described the market reaction to Trump’s sudden remarks as driven by a “sell first, ask questions later” mentality. This volatility has made gold the preferred haven for capital. The stagnation in bond yields and the turmoil in the stock market have jointly reinforced gold’s position in asset allocation.
French Political Turmoil: Spillover of Risks in Europe
Political uncertainty in Europe cannot be overlooked either. French Prime Minister Michel Leclercq, after assuming office again, stated that he would focus on addressing the current crisis. However, facing deep divisions, he could face impeachment from the National Assembly at any time. Details about the formation of the new government remain unclear, and individuals intending to run for the 2027 presidential election will not be included, leaving France’s political situation in disarray.
The potential risk of a collapse of the French government, coupled with the U.S. government shutdown, further amplifies global political turbulence.
Leadership changes in Japan have also added to uncertainties. While these events may seem regional, their ripple effects through financial markets indirectly drive up demand for gold.
Kuptsikevich noted that political instability has forced investors to turn to precious metals as safe-haven assets. This year’s surge in gold prices is a result of this sectoral shift, with central banks increasing their share of gold reserves, signaling long-term positive prospects.
Outlook: Expert Opinions and Market Forecasts
Looking ahead, the outlook for gold prices remains predominantly bullish. Although economic data will be scarce this week due to the U.S. government shutdown, key reports such as manufacturing data from the New York Fed and the Philadelphia Fed, along with Fed Chair Powell’s discussion on Tuesday, will be crucial focal points. Additionally, the annual meetings of the International Monetary Fund and the World Bank may provide policy signals.
Last week, 17 analysts participated in Kitco News’ gold survey. Eight experts, or 47%, anticipated that the price of gold would rise in the upcoming week, while another two, or 12%, predicted a decline. The remaining seven analysts, accounting for 41% of the total, expected the gold price to remain range-bound in the coming week.
Meanwhile, in Kitco’s online poll, which garnered 295 votes, bullish sentiment among Main Street retail investors began to catch up with that of professionals. A total of 202 individual traders, or 69%, expected the gold price to rise in the coming week, while another 52, or 18%, forecasted that gold would lose ground. The remaining 41 retail investors, representing 14% of the total, expected prices to consolidate in the next week.
“The market is on the rise,” said Rich Checkan, President and Chief Operating Officer of Asset Strategies International. “You don’t need to look far to see that the current momentum clearly favors the bulls. Just consider how quickly gold and silver recovered last Friday from the significant profit-taking seen on Thursday. One day later, it was as if nothing had happened.”
“The fragile peace in the Middle East, renewed drone and missile attacks on Ukraine, the ongoing U.S. government shutdown, a weak dollar, and another interest rate cut at the end of the month make it clear where gold is heading,” Checkan added. “Play that broken record again.”
Alex Kuptsikevich, Senior Market Analyst at FxPro, believes that gold prices may continue to rise in the coming week.
“While currencies and equities depend on the actions of presidents and governments, precious metals remain unaffected,” he said. “Thus, political turmoil forces investors to turn to them as safe-haven assets. The substantial 52% rise in gold this year began in April when the U.S. imposed tariffs on Liberation Day. This rally has been sustained by the U.S. government shutdown, France’s political crisis, and Japan’s leadership changeover.”
Kuptsikevich stated that the increase in gold prices above $4,000 per ounce was not solely due to the weakness of fiat currencies. “There has been a tectonic shift in portfolio composition, along with concerns about financial crises triggered by government profligacy,” he said. “The share of precious metals is rising in both speculators’ assets and central banks’ gold and foreign exchange reserves. This indicator has already surpassed the share of the euro. According to Eurizon Capital, if this proportion were equal to the dollar’s share, the price per ounce would soar to $8,500.”
(Spot Gold Daily Chart, source: Yihuitong)
At 07:41 Beijing Time, spot gold is trading at USD 4,037.26 per ounce.
