Gold Extends Record-Setting Rally Amid US-China Trade Tensions and Dovish Fed Bets

Gold hits an all-time high as investors seek safety amid US-China trade uncertainties and dovish Fed expectations.

Gold continues its remarkable upward trajectory, reaching new record highs during the Asian session on Monday. The precious metal climbed to the $4,078 level, supported by a blend of geopolitical concerns, economic uncertainty, and dovish expectations from the US Federal Reserve. Investors’ appetite for the safe-haven metal remains strong, even as technical indicators suggest that Gold (XAU/USD) might be slightly overbought in the short term.

Technical Overview: Bulls in Control, but Consolidation Likely

Gold prices bounced from a three-week-old ascending trend line late last week, reinforcing bullish momentum. The rebound from this strong technical support zone pushed XAU/USD to new all-time highs. However, with prices hovering deep in overbought territory on short-term charts, analysts caution that a near-term consolidation or modest pullback could be healthy before any further rally.

Should Gold retrace, the $4,020–$4,018 area is expected to act as immediate support, with stronger buying interest anticipated near the $4,000 psychological level. This zone, bolstered by the underlying bullish sentiment, could limit downside movement. A decisive break below the trend line support around $3,965–$3,964 might trigger technical selling, potentially opening the door for a dip toward the $3,900 mark.

Fundamental Overview: Trade Tensions and Dovish Fed Outlook Fuel the Rally

The primary catalysts behind Gold’s historic run are renewed US-China trade tensions and growing expectations of further Fed rate cuts.

Last week, global markets were rattled when US President Donald Trump threatened to impose 100% tariffs on Chinese exports and implement new export restrictions on key technologies beginning November 1. In a swift response, China accused the US of double standards and warned of countermeasures, signaling a potential escalation in trade hostilities.

Although Trump softened his tone over the weekend—stating on Truth Social that the US “does not wish to hurt China” and expressing hope for mutual economic stability—the damage to market sentiment had already been done. The uncertainty surrounding a possible meeting between Trump and Chinese President Xi Jinping later this year continues to weigh heavily on investors’ minds.

As a result, traders have sought refuge in safe-haven assets like Gold, propelling prices to fresh highs.

US Government Shutdown Adds to Economic Anxiety

Another key driver behind the sustained Gold rally is the ongoing US government shutdown, now entering its third week. The impasse in Congress over funding has stalled government operations and left thousands of federal employees without pay. With the Senate not scheduled to vote until Tuesday afternoon, and both parties unwilling to compromise, the political stalemate has deepened concerns about economic disruption.

President Trump has blamed Democrats for the extended shutdown, while House leaders remain divided on how to move forward. The prolonged uncertainty has only strengthened the appeal of Gold as a reliable store of value amid fiscal instability.

Geopolitical Risks Reinforce Safe-Haven Demand

Beyond trade tensions and domestic political gridlock, geopolitical risks are adding another layer of support to Gold prices. Speaking aboard Air Force One, President Trump hinted that the US could supply Ukraine with Tomahawk missiles if Russia does not agree to peace terms soon. Moscow swiftly responded with warnings against such moves, heightening fears of further escalation in the Russia-Ukraine conflict.

The persistent geopolitical unease continues to drive capital flows toward the non-yielding yellow metal, underscoring its role as a global hedge against uncertainty.

Fed’s Dovish Outlook Keeps Dollar Under Pressure

According to the CME FedWatch Tool, markets are pricing in a 96% probability of a 25-basis-point Fed rate cut in October, followed by an 87% chance of another cut in December. Such expectations have placed the US Dollar (USD) on the defensive, further supporting Gold’s rally.

A dovish monetary policy stance reduces the opportunity cost of holding Gold, making it more attractive relative to interest-bearing assets. Combined with thin liquidity due to a US bank holiday, these conditions have amplified the upside momentum in XAU/USD.

Conclusion: Gold’s Bullish Bias Remains Intact

While short-term technical indicators suggest that Gold may face temporary consolidation, the broader outlook remains firmly bullish. With geopolitical risks, economic uncertainty, and expectations of additional Fed rate cuts all converging, investors continue to favor Gold as a safe-haven investment.

As long as prices hold above the $3,965 support region, the next potential upside target could be the $4,100–$4,150 range in the coming sessions.

In essence, Gold’s record-breaking rally is a reflection of growing investor caution and the shifting global macroeconomic landscape — where safety, once again, reigns supreme.