Gold prices surged during Thursday’s European session, reaching a record high near $4,246 amid mounting expectations of Federal Reserve interest rate cuts and ongoing trade tensions between the United States and China.
Fed rate cut expectations boost gold
Market participants are increasingly confident that the Federal Reserve will ease monetary policy, with the CME FedWatch tool showing a 94.6% probability of a 50 basis point reduction in rates by year-end.
This follows statements from Federal Open Market Committee members, including Chair Jerome Powell, who highlighted rising downside risks to the US labor market.
On Tuesday, Powell stated:
“Downside risks to the US job market have risen,”
justifying the anticipated rate cut in September. Lower interest rates typically benefit non-yielding assets like gold.
Geopolitical tensions drive safe-haven demand
Gold’s rally is further supported by escalating US-China trade frictions.
President Donald Trump’s recent announcement of 100% tariffs on certain Chinese goods, in response to Beijing’s export controls on rare earths and magnets, has heightened geopolitical uncertainty and increased the appeal of safe-haven assets such as gold.
Gold’s role in global reserves
Central banks continue to be major buyers of gold, adding 1,136 tonnes to their reserves in 2022—the highest annual purchase on record. This trend underscores gold’s enduring role as a safe-haven and reserve asset amid economic and geopolitical uncertainty.
