Gold price climbs to record on Fed rate-cut bets and US-China tensions

Gold rose to a record, boosted by bets that the Federal Reserve will press on with monetary easing and heightened US-China frictions.

Bullion has risen more than 6% so far this week and touched a peak above $4,280 an ounce on Thursday, extending a breakneck rally that began in August. The buying spree has spread to other precious metals, with silver surging more than 3% on Wednesday as the London market remained tight.

Traders are piling into wagers on at least one outsized US rate cut by year-end, while Fed Chair Jerome Powell signaled this week the central bank is on track to deliver another quarter-point reduction later this month. 

The ongoing US government shutdown bas delayed the release of key data, but any resolution is expected to unleash a flood of information on the evolving state of the economy, which may provide evidence of weakness to support more rate cuts. That’d benefit bullion as it doesn’t pay any interest. 

Gold has also been supported by concerns over a resurgence in trade frictions, including those between China and the US. A White House official said President Donald Trump will speak with his Russian counterpart Vladimir Putin Thursday. 

The precious metal has surged more than 60% this year, underpinned by central bank buying, inflows to exchange-traded funds and soaring demand for haven assets in the face of geopolitical and trade tensions, rising fiscal and debt levels and threats to the Fed’s independence. 

“Nothing has changed for me: For the last $2,000 per ounce we’ve been bullish and everything that’s taken us here is still bullish,” Michael Widmer, head of metals research at Bank of America Corp., said in an interview on Bloomberg Television. Nevertheless, “ETF inflows last month were up 880% year-over-year, and that is ultimately a concern,” since it’s unsustainable.

The silver market, meanwhile, has been gripped by a lack of liquidity in London, sparking a worldwide hunt for the metal and driving benchmark prices to soar above futures in New York. Prices touched a record above $53 an ounce this week.

Over the past week, more than 15 million ounces of silver have been withdrawn from warehouses linked to the Comex futures exchange in New York. Much of that is likely headed to London, where it should help ease market tightness — though solid ETF inflows of almost 11 million ounces over that period have further eroded London stocks.

The ETF investment flows that helped drive silver to record highs are starting to stall. …The plateau in silver ETFs doesn’t mean investors are exiting, but it suggests the accumulation wave that fueled silver’s run is losing momentum. Meanwhile, it’s gold that’s attracting the steadier capital.

-Nour Al Ali, Macro Markets & Squawk. Click here for the full analysis

Spot gold was up 1.5% to $ 4,272.36 an ounce as of 12:36 p.m. in New York. Silver, platinum and palladium all advanced. The Bloomberg Dollar Spot Index dipped 0.2%, falling for a third day. 

(By Preeti Soni, Jack Ryan and Yvonne Yue Li)

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