Gold prices are currently at all-time highs, hovering around $4,240 as of this month. That represents a close to 10% gain in value since the beginning of October. For year-to-date, we’ve experienced a remarkable increase of more than 60%. Indeed, the precious metal has published its all-time record high, climbing to almost $4,250. This boom is primarily driven by increasing trade war hysteria between the US and China and hopes for further Fed interest rate lowering.
The escalating trade confrontation has morphed into what analysts are calling a “full-blown trade war.” US President Donald Trump made a promise that many thought was impossible. As of November 1, he is going to raise 100% tariffs on all imports from China. This escalation has introduced major instability in the marketplace. As a result, investors are now fleeing to safety in gold, a traditional safe-haven asset.
Central Banks Increase Gold Reserves
Emerging economy central banks, including China, India and Turkey have been at the forefront. They are on the warpath to increase their own gold reserves as a bulwark against global economic turmoil. In 2022 alone, these central banks added a total of 1,136 tonnes of gold—valued at around $70 billion—to their reserves. This represents the greatest annual net purchase of gold ever recorded.
This trend with these central banks highlights a larger central bank playbook to diversify reserves given the increase in geopolitical risks. Major central banks are significantly increasing their gold reserves. In the back-base of course, gold bulls seem completely undeterred, driving confident open high prices skyward!
Gold is consistently still finding short term support at $4,200. In the short term, analysts aren’t optimistic about a significant pullback to the 50-day Simple Moving Average where it would grab near $4,065. This prevailing bearish sentiment is indicative of the strong belief in gold to hold its ground in times of pressure.
“If we didn’t have tariffs, we would be exposed as being a nothing.” – US President Donald Trump
Economic Outlook Influenced by US-China Relations
The future course of US economic growth through 2026 will be heavily influenced by the future course of these still unfolding and very volatile tensions with China. President Trump is scheduled to meet with Chinese President Xi Jinping later this month in South Korea. Similarly, they will be expected to promote healthy trade relations and find amicable resolutions to longstanding disputes.
Many market analysts are hoping that a successful negotiation will at least prolong the present trade truce. This all depends on Beijing’s willingness to postpone its proposed export controls on rare earth elements. A lack of agreement might heighten current economic uncertainties and push investors more firmly into gold.
Traders are hanging on every new development to walk through the looking glass. The CME FedWatch Tool now displays a remarkable 96.7% probability of at least one 25-basis-point rate cut by the Federal Reserve’s October 29-30 meeting. Such cuts usually support gold prices given that they reduce the opportunity cost of holding non-yielding assets.
Market Reactions and Future Trends
These realities of today’s gold market underscore a challenging intersection between geopolitical developments and central bank policy deliberations. Meanwhile, gold prices are skyrocketing. This dramatic increase is indicative of not only the immediate market reaction but the long-term thinking and planning by investors looking to safeguard their wealth.
These same support levels are vital for gold traders and investors. Having built up heavy support of their own at the $4,150-$4,160 area, traders on either side of the market are intensely watching price action at these levels. The overall outlook indicates that unless there is some significant catalyst, gold will likely assume a role of upward propulsion.
The trade war is ongoing and ever-changing, and central banks are reacting accordingly. Consequently, gold will remain an indispensable ingredient for global investors seeking to balance risk.