WASHINGTON (dpa-AFX) - Gold prices zoomed higher on Thursday - setting a new record - the bull run aided by the flare-up in U.S.-China trade tensions and the ongoing U.S. government shutdown along with the likelihood of a rate cut by the U.S. Federal Reserve becoming more certain.
Front Month Comex Gold for October delivery surged by $103.30 (or 2.47%) to $4,280.20 per troy ounce.
Front Month Comex Silver for October delivery skyrocketed by $1.9500 (or 3.82%) to $53.023 per troy ounce.
Notably, this is a new record close for gold and silver prices, both of which have increased for five consecutive sessions.
Last Thursday, China increased restrictions on its rare earth exports. Rare earths are essential for the manufacturing and technology sectors as they are widely used in the manufacture of smartphones, laptops, electric vehicles, jet engines and more.
Enraged by this, U.S. President Donald Trump announced a new 100% tariff on Chinese imports (slated to begin from November 1). He also announced export controls on all critical software to China.
Further, Trump expressed disinterest in meeting Chinese President Xi Jinping in a summit in South Korea later this month.
While China stopped buying soybean from the U.S., Trump indicated that the U.S. would altogether stop buying cooking oil from China.
On Tuesday, in a related move, China imposed sanctions on U.S.-linked five subsidiaries of South Korean shipbuilder Hanwha Ocean.
As the trade faceoff spilled over to maritime trade relations, both nations began to charge additional port fees on shipping vessels linked to each other's countries beginning this Tuesday.
These quick developments derailed all the progress made in the recent months between both nations on Trump's 'tariff war'.
This conflict between the world's two major superpowers and largest consumers has helped gold's safe-haven appeal among investors.
In the U.S., the government shutdown entered day 16 today.
What looked like a short period of government closure on October 1 is now cascading into a bigger economic challenge to the U.S. The country is already suffering due to rising unemployment, eroding consumer confidence, and trade war uncertainty.
Around 750,000 federal employees have been furloughed. In a court filing, the Trump administration conceded it has axed more than 4,200 federal employees.
The U.S. Treasury Secretary stated that the shutdown is slowing the nation's economy. A treasury official projected that it costs the economy, approximately $15 billion weekly.
The longer the shutdown runs, the greater is the risk to investor confidence.
On Tuesday, in his highly anticipated speech at the National Association for Business Economics conference in Philadelphia, Fed Chair Jerome Powell conceded a slowdown in hiring and that tariffs have pushed prices higher. His address also hinted that the Fed is ending quantitative tightening.
Despite speculation, Powell stopped short of offering any guidance on future rate cuts. The government shutdown is limiting access to key economic data for the U.S. Fed as well as investors.
According to CME Group's FedWatch Tool, investors are betting on a 95.7% chance of a 25-basis-point interest rate cut at the Fed's upcoming October 28-29 meeting after Powell's remarks.
In the U.S., the Federal Reserve Bank of Philadelphia's Manufacturing Index fell to a six-month low of negative 12.8 in October from a positive 23.2 in September.
The Philadelphia Fed Employment index decreased to a four-month low of 4.6 in October from 5.6 in September.
In an effort to end the ongoing Russia-Ukraine war, German Chancellor Friedrich Merz announced that at an upcoming EU summit, he would call for the European Union to use Russian assets frozen in the West to be utilized to provide a $163 billion (140 billion euros) loan to Ukraine to finance its war effort.
According to the International Monetary Fund, central bank holdings of physical gold in emerging markets have risen 161% since 2006 to around 10,300 tons.
The World Gold Council reported ETF inflows topping $26 billion for the September quarter and $64 billion for the nine months to September. Bullion has surged around 59% year-to-date, fueled by these rapid increases.
The buying frenzy is also spreading to other precious metals, with silver soaring more than 3% this week.
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