Gold Trading Alert: A new all-time high! Multiple positive factors drive gold prices up over 2%, is $5,000 within reach?
2025-10-21 07:15:01
Amidst the volatile global financial markets, gold, as a traditional safe-haven asset, has once again demonstrated its unparalleled appeal. On Monday, spot gold prices surged by over 2.5%, reversing all of Friday's losses and reaching a new all-time high of $4,381.29 per ounce. They ultimately closed at $4,356.26, up approximately 2.5%. This strong rebound in gold prices is driven not only by strong investor expectations for further Federal Reserve rate cuts, but also by continued safe-haven demand and the potential uncertainty surrounding the Sino-US trade negotiations. With the US government shutdown entering its 20th day and key economic data releases delayed, the market is highly sensitive. In early Asian trading on Tuesday (October 21st), spot gold prices fluctuated at high levels, currently trading around $4,368.89 per ounce.
This round of rise in gold prices is not accidental, but the result of the interweaving of multiple factors.
First, the lack of U.S. economic data has exacerbated market anxiety. Due to the 20-day government shutdown, the originally scheduled release of the Consumer Price Index (CPI) data was delayed until Friday, leaving investors and Federal Reserve policymakers in a fog ahead of the upcoming policy meeting.
Experts point out that this data delay not only amplifies economic uncertainty but also reinforces the spread of risk aversion. Jeffrey Christian, managing partner of CPM Group, bluntly stated that political and economic concerns were the core force driving the rapid rebound in gold prices after last Friday's sharp drop.
He stressed that gold prices had retreated to a low of $4,186.45 an ounce last Friday due to U.S. President Trump's remarks on easing trade tensions between China and the United States, marking the biggest single-day drop since mid-May, but this pullback was only a temporary respite and was soon replaced by broader concerns.
On October 20, local time, the U.S. Senate voted on a government funding bill for the 11th time but still failed to pass it, thus continuing the U.S. government shutdown that began on October 1. The bill, which was originally intended to extend government funding until November 21, ultimately failed to reach the 60 vote threshold required for passage, with 50 votes in favor and 43 votes against.
At the same time, expectations of the Federal Reserve's monetary policy have become a powerful engine for rising gold prices.
Traders are betting with almost a 99% probability that the Federal Reserve will cut interest rates by 25 basis points at its meeting next week, and even expect another rate cut in December. The root of this easing expectation is the potential weakness of the US economy and the indirect impact of trade friction on inflation and growth.
Byron Anderson, head of fixed income at Laffer Tengler Investments, said the bond market is currently performing well and there is no panic, but the longer the shutdown lasts, the greater the uncertainty, which will further prompt the Federal Reserve to maintain its path of interest rate cuts. He believes that the Fed's actions are not only necessary but will also provide continued support for gold, as a low interest rate environment typically weakens the attractiveness of the US dollar and instead boosts the value of non-interest-bearing assets such as gold.
The progress of Sino-US trade negotiations has always been an important variable affecting gold price fluctuations. Gold prices rose on Monday as investors remained highly vigilant about the upcoming negotiations.
Although Trump said on Friday that his scheduled meeting with Chinese President Xi Jinping would go ahead as planned and expressed admiration for the Chinese leader, the market was not fully convinced.
U.S. Treasury Secretary Jeffrey Bessant is expected to meet with Chinese Vice Premier He Lifeng in Malaysia this week to try to prevent an escalation of tariffs on China. Trump has also hinted at easing tariffs if China resumes purchases of key agricultural products such as soybeans. While this has eased some concerns, the underlying tensions in the trade war remain. Trump's blaming of the recent showdown on China's rare earth export controls further underscores the complexity of geopolitical risks.
From a broader perspective, trade tensions have permeated global foreign exchange and bond markets. U.S. bond markets saw small gains on Monday, with the 10-year Treasury yield falling to 3.989% and the 30-year to 4.579%, reflecting investors' continued caution despite the improving trade outlook.
Stan Shipley, managing director of Evercore ISI, noted that sentiment toward China and trade has improved, believing it will not turn into a nightmare, but this does not mean that risks have completely dissipated. Similarly, in the foreign exchange market, the US dollar index rose slightly to 98.587, but its resilience faces multiple tests, including the damage to economic activity caused by the government shutdown and the squeeze on household income and corporate profits from tariffs.
Klaus Baader, global chief economist at Societe Generale, warned that these factors will continue to test the dollar, and the dollar's relative weakness tends to amplify gold's appeal.
Gold's safe-haven properties are further amplified in the current global economic environment. U.S. stocks closed sharply higher on Monday, with the Dow Jones Industrial Average up 1.12% to 46,706.58, the S&P 500 up 1.07% to 6,735.13, and the Nasdaq up 1.37% to 22,990.54. This rebound was fueled by upbeat quarterly earnings and easing concerns about regional bank credit quality. Apple's stock price hit a record high, and the Philadelphia Semiconductor Index also broke a new record, demonstrating strong momentum in technology and financial stocks. However, this optimism does not completely mask potential risks. Paul Nolte, senior wealth advisor at Murphy & Sylvest, believes that the relief rally in financial stocks may be an overcorrection of last week's downward reaction, but the overall market still lacks a buffer against negative factors.
Internationally, political developments in Japan and the eurozone also indirectly impacted the gold market. Japan's yen weakened slightly as the near-certainty that hardline conservative Sanae Takaichi would become the first female prime minister sparked concerns about fiscal expansion, potentially further weakening the yen and boosting the dollar. The Bank of Japan will hold its policy meeting on October 30th, with the market implying a 23% probability of an interest rate hike, a stark contrast to the Federal Reserve's path of rate cuts.
The euro rose slightly against the dollar, but the easing of political tensions in France was only temporary, and the freeze on pension reforms did not eliminate the underlying risks. These global political uncertainties magnified the safe-haven demand for gold.
Barclays pointed out that due to the lack of obvious catalysts, the government shutdown may continue until November, when political and economic pressures will intensify, further supporting gold prices.
Furthermore, the "bull market flattening" phenomenon in the bond market deserves attention. The yield gap between the two-year and 10-year U.S. Treasury bonds narrowed to 52.4 basis points, typically signaling rising risk aversion or declining inflation expectations, often a precursor to a Federal Reserve rate cut. BMO analysts stated in a report that the upcoming September core CPI data is expected to rise by 0.3%, the same as in August, reinforcing the view that the trade war's impact on inflation is limited. However, even if the data is higher, it will not prevent a rate cut this month. This inflation perspective provides additional support for gold, as the metal tends to outperform when inflation expectations are volatile.
Ukrainian drones attacked a gas processing plant in southern Russia operated by state-controlled Gazprom on Sunday. Another drone struck the Novokubinesk oil refinery near Orenburg in Russia's Samara Oblast.
Ukrainian President Volodymyr Zelensky said on Monday that after meeting with US President Trump, "our position on the front remains firm." He also said the Russia-Ukraine conflict "cannot end so quickly" and that the situation in Ukraine is unique in the world and far exceeds other armed conflicts in its scale.
This means that the risk of further escalation of the war between Russia and Ukraine remains.
In addition, the Middle East war has reignited. The Gaza Civil Defense Agency said that a series of air strikes launched by Israel on Sunday killed at least 11 people in the Gaza Strip, and Israel and Hamas accused each other of violating the ceasefire agreement.
According to a statement by the Israel Defense Forces on the 20th local time, several Palestinian militants crossed the "yellow line" marked by the Israeli army in the Gaza Strip that day and opened fire at the Israeli army. During the exchange of fire, the Israeli army drone killed two Palestinian militants. The Israeli army has no casualties so far.
Looking ahead, the outlook for the gold market is optimistic. Jeffrey Christian boldly predicts further price increases in the coming weeks and months. It wouldn't be surprising if gold prices soon reached $4,500 per ounce, and even $5,000 at some point next year isn't out of the question. This depends on whether political issues persist or worsen, a scenario exemplified by the current Sino-US trade friction, the government shutdown, and global political turmoil.
Matthew Keator, managing partner of Keator Group, added that corporate uncertainties such as tax legislation and tariffs earlier this year have temporarily subsided, with companies focusing more on profits, which may provide a buffer for the economy, but the long-term impact of the trade war will still drag on growth, which is good for gold.
Overall, this round of gold price appreciation reflects a concentrated surge in safe-haven demand amidst global uncertainty. Investors should closely monitor this week's CPI data, the progress of US-China trade negotiations, and next week's Federal Reserve meeting, as these events will directly shape the future trajectory of gold prices. In such volatile times, gold is more than just a metal; it serves as an anchor of investor confidence. With the potential $5,000 target in sight, rational investment strategies may be the wisest option at this time.
(Spot gold daily chart, source: Yihuitong)
At 07:10 Beijing time, spot gold was trading at $4,368.79 per ounce.
The US government shutdown continues
This round of rise in gold prices is not accidental, but the result of the interweaving of multiple factors.
First, the lack of U.S. economic data has exacerbated market anxiety. Due to the 20-day government shutdown, the originally scheduled release of the Consumer Price Index (CPI) data was delayed until Friday, leaving investors and Federal Reserve policymakers in a fog ahead of the upcoming policy meeting.
Experts point out that this data delay not only amplifies economic uncertainty but also reinforces the spread of risk aversion. Jeffrey Christian, managing partner of CPM Group, bluntly stated that political and economic concerns were the core force driving the rapid rebound in gold prices after last Friday's sharp drop.
He stressed that gold prices had retreated to a low of $4,186.45 an ounce last Friday due to U.S. President Trump's remarks on easing trade tensions between China and the United States, marking the biggest single-day drop since mid-May, but this pullback was only a temporary respite and was soon replaced by broader concerns.
On October 20, local time, the U.S. Senate voted on a government funding bill for the 11th time but still failed to pass it, thus continuing the U.S. government shutdown that began on October 1. The bill, which was originally intended to extend government funding until November 21, ultimately failed to reach the 60 vote threshold required for passage, with 50 votes in favor and 43 votes against.
Markets bet on the Fed cutting interest rates twice more this year
At the same time, expectations of the Federal Reserve's monetary policy have become a powerful engine for rising gold prices.
Traders are betting with almost a 99% probability that the Federal Reserve will cut interest rates by 25 basis points at its meeting next week, and even expect another rate cut in December. The root of this easing expectation is the potential weakness of the US economy and the indirect impact of trade friction on inflation and growth.
Byron Anderson, head of fixed income at Laffer Tengler Investments, said the bond market is currently performing well and there is no panic, but the longer the shutdown lasts, the greater the uncertainty, which will further prompt the Federal Reserve to maintain its path of interest rate cuts. He believes that the Fed's actions are not only necessary but will also provide continued support for gold, as a low interest rate environment typically weakens the attractiveness of the US dollar and instead boosts the value of non-interest-bearing assets such as gold.
The hanging sword effect of international trade negotiations
The progress of Sino-US trade negotiations has always been an important variable affecting gold price fluctuations. Gold prices rose on Monday as investors remained highly vigilant about the upcoming negotiations.
Although Trump said on Friday that his scheduled meeting with Chinese President Xi Jinping would go ahead as planned and expressed admiration for the Chinese leader, the market was not fully convinced.
U.S. Treasury Secretary Jeffrey Bessant is expected to meet with Chinese Vice Premier He Lifeng in Malaysia this week to try to prevent an escalation of tariffs on China. Trump has also hinted at easing tariffs if China resumes purchases of key agricultural products such as soybeans. While this has eased some concerns, the underlying tensions in the trade war remain. Trump's blaming of the recent showdown on China's rare earth export controls further underscores the complexity of geopolitical risks.
From a broader perspective, trade tensions have permeated global foreign exchange and bond markets. U.S. bond markets saw small gains on Monday, with the 10-year Treasury yield falling to 3.989% and the 30-year to 4.579%, reflecting investors' continued caution despite the improving trade outlook.
Stan Shipley, managing director of Evercore ISI, noted that sentiment toward China and trade has improved, believing it will not turn into a nightmare, but this does not mean that risks have completely dissipated. Similarly, in the foreign exchange market, the US dollar index rose slightly to 98.587, but its resilience faces multiple tests, including the damage to economic activity caused by the government shutdown and the squeeze on household income and corporate profits from tariffs.
Klaus Baader, global chief economist at Societe Generale, warned that these factors will continue to test the dollar, and the dollar's relative weakness tends to amplify gold's appeal.
A magnifying glass on global economic uncertainty
Gold's safe-haven properties are further amplified in the current global economic environment. U.S. stocks closed sharply higher on Monday, with the Dow Jones Industrial Average up 1.12% to 46,706.58, the S&P 500 up 1.07% to 6,735.13, and the Nasdaq up 1.37% to 22,990.54. This rebound was fueled by upbeat quarterly earnings and easing concerns about regional bank credit quality. Apple's stock price hit a record high, and the Philadelphia Semiconductor Index also broke a new record, demonstrating strong momentum in technology and financial stocks. However, this optimism does not completely mask potential risks. Paul Nolte, senior wealth advisor at Murphy & Sylvest, believes that the relief rally in financial stocks may be an overcorrection of last week's downward reaction, but the overall market still lacks a buffer against negative factors.
Internationally, political developments in Japan and the eurozone also indirectly impacted the gold market. Japan's yen weakened slightly as the near-certainty that hardline conservative Sanae Takaichi would become the first female prime minister sparked concerns about fiscal expansion, potentially further weakening the yen and boosting the dollar. The Bank of Japan will hold its policy meeting on October 30th, with the market implying a 23% probability of an interest rate hike, a stark contrast to the Federal Reserve's path of rate cuts.
The euro rose slightly against the dollar, but the easing of political tensions in France was only temporary, and the freeze on pension reforms did not eliminate the underlying risks. These global political uncertainties magnified the safe-haven demand for gold.
Barclays pointed out that due to the lack of obvious catalysts, the government shutdown may continue until November, when political and economic pressures will intensify, further supporting gold prices.
Furthermore, the "bull market flattening" phenomenon in the bond market deserves attention. The yield gap between the two-year and 10-year U.S. Treasury bonds narrowed to 52.4 basis points, typically signaling rising risk aversion or declining inflation expectations, often a precursor to a Federal Reserve rate cut. BMO analysts stated in a report that the upcoming September core CPI data is expected to rise by 0.3%, the same as in August, reinforcing the view that the trade war's impact on inflation is limited. However, even if the data is higher, it will not prevent a rate cut this month. This inflation perspective provides additional support for gold, as the metal tends to outperform when inflation expectations are volatile.
The geopolitical situation remains volatile
Ukrainian drones attacked a gas processing plant in southern Russia operated by state-controlled Gazprom on Sunday. Another drone struck the Novokubinesk oil refinery near Orenburg in Russia's Samara Oblast.
Ukrainian President Volodymyr Zelensky said on Monday that after meeting with US President Trump, "our position on the front remains firm." He also said the Russia-Ukraine conflict "cannot end so quickly" and that the situation in Ukraine is unique in the world and far exceeds other armed conflicts in its scale.
This means that the risk of further escalation of the war between Russia and Ukraine remains.
In addition, the Middle East war has reignited. The Gaza Civil Defense Agency said that a series of air strikes launched by Israel on Sunday killed at least 11 people in the Gaza Strip, and Israel and Hamas accused each other of violating the ceasefire agreement.
According to a statement by the Israel Defense Forces on the 20th local time, several Palestinian militants crossed the "yellow line" marked by the Israeli army in the Gaza Strip that day and opened fire at the Israeli army. During the exchange of fire, the Israeli army drone killed two Palestinian militants. The Israeli army has no casualties so far.
Gold's bright future
Looking ahead, the outlook for the gold market is optimistic. Jeffrey Christian boldly predicts further price increases in the coming weeks and months. It wouldn't be surprising if gold prices soon reached $4,500 per ounce, and even $5,000 at some point next year isn't out of the question. This depends on whether political issues persist or worsen, a scenario exemplified by the current Sino-US trade friction, the government shutdown, and global political turmoil.
Matthew Keator, managing partner of Keator Group, added that corporate uncertainties such as tax legislation and tariffs earlier this year have temporarily subsided, with companies focusing more on profits, which may provide a buffer for the economy, but the long-term impact of the trade war will still drag on growth, which is good for gold.
Overall, this round of gold price appreciation reflects a concentrated surge in safe-haven demand amidst global uncertainty. Investors should closely monitor this week's CPI data, the progress of US-China trade negotiations, and next week's Federal Reserve meeting, as these events will directly shape the future trajectory of gold prices. In such volatile times, gold is more than just a metal; it serves as an anchor of investor confidence. With the potential $5,000 target in sight, rational investment strategies may be the wisest option at this time.
(Spot gold daily chart, source: Yihuitong)
At 07:10 Beijing time, spot gold was trading at $4,368.79 per ounce.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
