Gold prices surge to new record high as economic risks and expectations of Fed rate cuts boost demand
2025-10-16 13:37:24
Spot gold prices continued their upward trend for the fifth consecutive day during the Asian session on Thursday (October 16), reaching a new record high of $4,241.93 per ounce as global anxiety persisted. Investor concerns about the economic risks posed by the US government shutdown, international trade wars, and escalating geopolitical tensions continued to drive flows into the traditional safe-haven asset. Furthermore, the Federal Reserve's (Fed) dovish outlook further supported demand for the non-yielding metal.
In fact, traders now appear to have almost fully priced in two more rate cuts from the US central bank this year. This expectation briefly pushed the US dollar to a more than one-week low and bolsters the case for further near-term gold appreciation. Meanwhile, gold bulls appear undeterred by the extremely overbought conditions on short-term charts. This further validates the commodity's positive short-term outlook ahead of speeches from several influential Federal Open Market Committee (FOMC) members.
However, the US dollar index has recovered its losses earlier in the day, making gold bulls cautious. Gold prices have now given up some of their gains and are trading around $4,210 an ounce.
The partial U.S. federal government shutdown entered its third week with no sign of a resolution. A Republican-backed stopgap funding bill failed to secure the votes needed for passage in the Senate for the ninth time on Wednesday.
Investors are concerned about the impact a prolonged U.S. government shutdown will have on economic performance. A Treasury official said the shutdown could cost the U.S. economy $15 billion in lost output per week, revising an earlier statement by Treasury Secretary Scott Bessent.
U.S.-China trade tensions escalated this week after both sides retaliated against each other over port fees. Separately, U.S. President Donald Trump said he was considering ending edible oil trade with China in retaliation for Beijing's refusal to buy U.S. soybeans.
Trump has said he believes the United States is in a full-blown trade war with China. However, U.S. Treasury Secretary Scott Besant proposed suspending import tariffs on Chinese goods for more than three months if China suspends plans to impose strict export controls on rare earth elements.
On the geopolitical front, U.S. Defense Secretary Pete Hegseth warned Russia that its continued aggression could face costs if the conflict with Ukraine is not ended, and Trump said he would consider providing Ukraine with longer-range Tomahawk cruise missiles.
Federal Reserve Chairman Jerome Powell struck a dovish tone on Tuesday, saying the labor market remained mired in a slowdown of low hiring and low firings through September, further solidifying market expectations of a 25 basis point rate cut at both the October and December Fed meetings.
The dollar fell for a third consecutive day, hitting a more than one-week low in Asian trading on Thursday. This helped extend gold prices' recent record-breaking rally and supported the possibility of further appreciation in the short term.
In the absence of major market-moving economic data, speeches from several influential FOMC members will be scrutinized for clues on rate cuts. This will play a key role in boosting demand for the dollar and provide some meaningful support for non-yielding gold.
The XAU/USD pair has been trending higher along an ascending trendline for the past month or so. Furthermore, a breakout and sustained support above the $4,200 round-figure mark overnight is seen as a new trigger for bulls. However, the extremely overbought conditions on the daily relative strength index (RSI) urge caution before investing further in the bull market.
Meanwhile, any pullback could attract buyers around $4,200, which in turn should limit gold's downside to the $4,180-$4,175 area. However, a decisive break below the latter could trigger some technical selling and drag the commodity price towards the intermediate support level of $4,135-$4,135, and then to the $4,100 mark. Further relevant support is around the $4,060-$4,055 area, a decisive break of which could be seen as the first sign that gold prices have peaked in the short term.
(Spot gold 4-hour chart)
At 13:36 Beijing time, spot gold was trading at $4212.79 per ounce.
In fact, traders now appear to have almost fully priced in two more rate cuts from the US central bank this year. This expectation briefly pushed the US dollar to a more than one-week low and bolsters the case for further near-term gold appreciation. Meanwhile, gold bulls appear undeterred by the extremely overbought conditions on short-term charts. This further validates the commodity's positive short-term outlook ahead of speeches from several influential Federal Open Market Committee (FOMC) members.
However, the US dollar index has recovered its losses earlier in the day, making gold bulls cautious. Gold prices have now given up some of their gains and are trading around $4,210 an ounce.
Daily Market Update: Gold supported by global risk aversion, dovish Fed and weak dollar
The partial U.S. federal government shutdown entered its third week with no sign of a resolution. A Republican-backed stopgap funding bill failed to secure the votes needed for passage in the Senate for the ninth time on Wednesday.
Investors are concerned about the impact a prolonged U.S. government shutdown will have on economic performance. A Treasury official said the shutdown could cost the U.S. economy $15 billion in lost output per week, revising an earlier statement by Treasury Secretary Scott Bessent.
U.S.-China trade tensions escalated this week after both sides retaliated against each other over port fees. Separately, U.S. President Donald Trump said he was considering ending edible oil trade with China in retaliation for Beijing's refusal to buy U.S. soybeans.
Trump has said he believes the United States is in a full-blown trade war with China. However, U.S. Treasury Secretary Scott Besant proposed suspending import tariffs on Chinese goods for more than three months if China suspends plans to impose strict export controls on rare earth elements.
On the geopolitical front, U.S. Defense Secretary Pete Hegseth warned Russia that its continued aggression could face costs if the conflict with Ukraine is not ended, and Trump said he would consider providing Ukraine with longer-range Tomahawk cruise missiles.
Federal Reserve Chairman Jerome Powell struck a dovish tone on Tuesday, saying the labor market remained mired in a slowdown of low hiring and low firings through September, further solidifying market expectations of a 25 basis point rate cut at both the October and December Fed meetings.
The dollar fell for a third consecutive day, hitting a more than one-week low in Asian trading on Thursday. This helped extend gold prices' recent record-breaking rally and supported the possibility of further appreciation in the short term.
In the absence of major market-moving economic data, speeches from several influential FOMC members will be scrutinized for clues on rate cuts. This will play a key role in boosting demand for the dollar and provide some meaningful support for non-yielding gold.
Gold's uptrend remains unimpeded as bulls ignore extreme overbought conditions
The XAU/USD pair has been trending higher along an ascending trendline for the past month or so. Furthermore, a breakout and sustained support above the $4,200 round-figure mark overnight is seen as a new trigger for bulls. However, the extremely overbought conditions on the daily relative strength index (RSI) urge caution before investing further in the bull market.
Meanwhile, any pullback could attract buyers around $4,200, which in turn should limit gold's downside to the $4,180-$4,175 area. However, a decisive break below the latter could trigger some technical selling and drag the commodity price towards the intermediate support level of $4,135-$4,135, and then to the $4,100 mark. Further relevant support is around the $4,060-$4,055 area, a decisive break of which could be seen as the first sign that gold prices have peaked in the short term.
(Spot gold 4-hour chart)
At 13:36 Beijing time, spot gold was trading at $4212.79 per ounce.
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