Trade frictions and Fed policy expectations dominate the market, with gold hovering below its historical high
2025-10-16 02:02:18
Spot gold continued its record-breaking streak during US trading on Wednesday (October 15th), breaking through the $4,200 mark to reach a new all-time high. Strong safe-haven inflows boosted demand, supporting gold prices. Gold prices have been hitting new all-time highs almost daily, driven by ongoing global economic and political uncertainty and growing market expectations of an easing stance by the Federal Reserve.
The direct trigger for gold's recent rally is the escalating trade war between China and the United States, with both sides increasing threats and retaliatory measures. Meanwhile, the ongoing US government shutdown has further enhanced the precious metal's safe-haven appeal.
A weaker dollar and low U.S. Treasury yields provided additional support for gold prices, keeping them near all-time highs. Furthermore, ongoing geopolitical tensions and steady institutional demand kept the overall outlook for gold strongly positive.
Market drivers: IMF warns of growth risks, markets tense
Trade-related news remains the focus of the market, dominating market sentiment, and trade conflicts are intensifying.
International Monetary Fund (IMF) Chief Economist Pierre-Olivier Goulenchat said on Tuesday that the re-escalation of the trade war has brought new downside risks to the global economy. Goulenchat reminded that this potential impact has not yet been fully reflected in the IMF's baseline forecast and warned that prolonged tariff uncertainty could inhibit global investment and trade flows.
Federal Reserve Chairman Jerome Powell struck a balanced tone in his speech at the National Association for Business Economics (NABE) conference on Tuesday. He acknowledged "significant slack" in the labor market since July, but warned that inflation "remains elevated." Powell noted that the current job market faces "considerable downside risks," but also cautioned that easing policy too quickly could leave the fight against inflation unfulfilled.
Federal Reserve Board Governor Stephen Milan said on Wednesday that "the labor market has weakened significantly," adding that "two more rate cuts this year are very likely." Milan pointed out that if policy continues to be accommodative, the unemployment rate is expected to fall slightly; at the same time, he predicted that overall personal consumption expenditure (PCE) inflation will fall back to the target level of 2% in about a year and a half.
Despite Powell's cautious tone, markets remain confident the Fed will continue cutting interest rates in the coming months. According to the CME FedWatch tool, traders see a 97% probability of another 25 basis point rate cut at the October 29-30 meeting and a 95% probability of another 25 basis point cut at the December meeting.
Wednesday's US economic data release was relatively light. Due to the ongoing government shutdown, the September Consumer Price Index (CPI) report has been postponed to October 24th. Later that day, the Federal Reserve will release its Beige Book, and several Fed officials will also deliver speeches. Markets are currently approaching the "quiet period" before the meeting, which begins on October 18th.
Technical analysis: RSI indicator is overbought, spot gold may pull back before a new round of rise
(Source of spot gold 4-hour chart: Yihuitong)
Spot gold bulls showed no signs of retreating, maintaining their dominant position even as momentum indicators showed signs of exhaustion.
On the 4-hour chart, initial support lies in the $4180-4160 range, which closely coincides with the 21-period Simple Moving Average (SMA). Further pullbacks could lead to further buying near $4100, where the 50-period SMA provides further dynamic support. A pullback towards these levels is expected to attract renewed buying, maintaining the overall upward trend.
However, some caution is warranted. The Relative Strength Index (RSI) remains elevated around 77, indicating overbought conditions. More importantly, the RSI indicator on the 4-hour chart has exhibited a bearish divergence. This suggests the current rally may enter a period of consolidation before a new leg higher is possible.
At 01:40 Beijing time, spot gold was quoted at $4191.16 per ounce, up 1.19%. Earlier in the European trading session, the price of gold hit a record high of $4218.
The direct trigger for gold's recent rally is the escalating trade war between China and the United States, with both sides increasing threats and retaliatory measures. Meanwhile, the ongoing US government shutdown has further enhanced the precious metal's safe-haven appeal.
A weaker dollar and low U.S. Treasury yields provided additional support for gold prices, keeping them near all-time highs. Furthermore, ongoing geopolitical tensions and steady institutional demand kept the overall outlook for gold strongly positive.
Market drivers: IMF warns of growth risks, markets tense
Trade-related news remains the focus of the market, dominating market sentiment, and trade conflicts are intensifying.
International Monetary Fund (IMF) Chief Economist Pierre-Olivier Goulenchat said on Tuesday that the re-escalation of the trade war has brought new downside risks to the global economy. Goulenchat reminded that this potential impact has not yet been fully reflected in the IMF's baseline forecast and warned that prolonged tariff uncertainty could inhibit global investment and trade flows.
Federal Reserve Chairman Jerome Powell struck a balanced tone in his speech at the National Association for Business Economics (NABE) conference on Tuesday. He acknowledged "significant slack" in the labor market since July, but warned that inflation "remains elevated." Powell noted that the current job market faces "considerable downside risks," but also cautioned that easing policy too quickly could leave the fight against inflation unfulfilled.
Federal Reserve Board Governor Stephen Milan said on Wednesday that "the labor market has weakened significantly," adding that "two more rate cuts this year are very likely." Milan pointed out that if policy continues to be accommodative, the unemployment rate is expected to fall slightly; at the same time, he predicted that overall personal consumption expenditure (PCE) inflation will fall back to the target level of 2% in about a year and a half.
Despite Powell's cautious tone, markets remain confident the Fed will continue cutting interest rates in the coming months. According to the CME FedWatch tool, traders see a 97% probability of another 25 basis point rate cut at the October 29-30 meeting and a 95% probability of another 25 basis point cut at the December meeting.
Wednesday's US economic data release was relatively light. Due to the ongoing government shutdown, the September Consumer Price Index (CPI) report has been postponed to October 24th. Later that day, the Federal Reserve will release its Beige Book, and several Fed officials will also deliver speeches. Markets are currently approaching the "quiet period" before the meeting, which begins on October 18th.
Technical analysis: RSI indicator is overbought, spot gold may pull back before a new round of rise
(Source of spot gold 4-hour chart: Yihuitong)
Spot gold bulls showed no signs of retreating, maintaining their dominant position even as momentum indicators showed signs of exhaustion.
On the 4-hour chart, initial support lies in the $4180-4160 range, which closely coincides with the 21-period Simple Moving Average (SMA). Further pullbacks could lead to further buying near $4100, where the 50-period SMA provides further dynamic support. A pullback towards these levels is expected to attract renewed buying, maintaining the overall upward trend.
However, some caution is warranted. The Relative Strength Index (RSI) remains elevated around 77, indicating overbought conditions. More importantly, the RSI indicator on the 4-hour chart has exhibited a bearish divergence. This suggests the current rally may enter a period of consolidation before a new leg higher is possible.
At 01:40 Beijing time, spot gold was quoted at $4191.16 per ounce, up 1.19%. Earlier in the European trading session, the price of gold hit a record high of $4218.
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