Gold extends record-breaking rally as trade war and Fed cut bets drive demand

• Gold extends record rally, hitting a new all-time high near $4,247 on Wednesday.
• Safe-haven demand surges amid escalating US-China trade tensions and a prolonged US shutdown.
• Technical outlook remains firmly bullish with strong momentum despite an overbought RSI.

Gold (XAU/USD) soars to yet another record high near $4,247 on Wednesday, extending its relentless climb driven by safe-haven demand amid growing geopolitical and economic uncertainty. At the time of writing, XAU/USD is trading around $4,240, up nearly 10% so far this month and over 60% year to date.

The US-China trade standoff remains at the forefront of investor focus after reigniting late last week, when US President Donald Trump rattled markets by unveiling plans to impose 100% tariffs on all Chinese imports starting November 1. The move came in response to Beijing's decision to tighten export controls on rare earth elements, deepening fears of a full-blown trade war and its potential drag on global growth.

At the same time, the United States (US) government shutdown, stretching into its third week, remains a drag on market sentiment as uncertainty lingers over when federal operations will resume. A broadly weaker US Dollar (USD) and subdued Treasury yields are further bolstering the metal's appeal as markets increasingly price in a dovish tilt from the Federal Reserve (Fed) in the months ahead.

Market movers: Trade war, Fed cut bets and shutdown woes keep markets on edge

• US President Donald Trump told reporters late Wednesday that the dispute with China has escalated into a "full-blown trade war." When asked if the standoff could turn into a prolonged conflict should talks with President Xi Jinping later this month fail, Trump replied, "We're in one now." The president defended his recent 100% tariff threat, saying, "If we didn't have tariffs, we would be exposed as being a nothing."
• There were a few positive signals from US Treasury Secretary Scott Bessent on Wednesday, which lifted hopes that the proposed 100% tariffs on Chinese imports may still be avoided. Bessent confirmed that President Donald Trump is "a go" for his meeting with Chinese President Xi Jinping later this month in South Korea and added that the US could consider extending the current trade truce if Beijing holds back on implementing its planned export controls on rare earth elements.
• The US Senate failed for the ninth time to pass a GOP-backed funding bill on Wednesday. The White House warned that cumulative layoffs could surpass 10,000 federal employees if the impasse drags on, while Treasury officials estimate the shutdown is already inflicting losses of up to $15 billion per week on the US economy.
• Fed Governor Stephen Miran reiterated on Thursday that while recent tariffs could eventually spur inflation, he has yet to see concrete signs of it emerging. He maintained his projection for US economic growth at around 2% in 2025, noting that the 2026 outlook will depend largely on how US-China tensions unfold. Miran's comments followed remarks on Wednesday, when he cautioned that rising trade frictions and China's export restrictions on rare-earth elements have increased downside risks to the US economy
• On the monetary policy front, markets remain convinced that the Fed is likely to deliver additional interest rate cuts before year-end. According to the CME FedWatch Tool, traders are pricing in a 96.7% probability of another 25-basis-point rate cut at the October 29-30 meeting, followed by a 93.7% chance of a similar move in December. The growing conviction of back-to-back cuts reflects expectations that the Fed will prioritize supporting a weakening labor market, even as inflation remains above the 2% target.
• Major banks have turned increasingly bullish on Gold. Bank of America now projects prices to reach $5,000 per ounce by 2026, while Goldman Sachs targets $4,900 by year-end 2026. ANZ Bank has lifted its outlook to $4,400 by end-2025, with a potential peak near $4,600 by June 2026.

Technical analysis: XAU/USD uptrend strong despite RSI divergence

Gold bulls remain firmly in control, with XAU/USD extending its record-setting rally without any signs of fatigue. The metal trades comfortably above both its short-term and long-term moving averages, reflecting strong underlying momentum and sustained buying interest.

Immediate support is seen around the $4,200 level, marking the intraday low, followed by the $4,150-$4,160 region, which coincides with the 21-period SMA on the 4-hour chart. A deeper pullback toward the 50-SMA near $4,065 looks unlikely in the near term as momentum and trend strength continue to favor dip-buying activity.

The Relative Strength Index (RSI) remains elevated around 77, holding in overbought territory. However, the indicator has failed to print fresh highs even as prices push to new records, a sign of waning momentum that suggests any near-term correction is likely to be shallow.