Gold (XAU/USD) is taking a breather on Tuesday after surging to a fresh all-time high near $4,179 earlier in the day as safe haven demand remains supported amid intensifying US-China trade tensions, dovish Federal Reserve (Fed) expectations, and growing uncertainties across major economies.

At the time of writing, XAU/USD is holding firm near $4,125 after a sharp intraday drop from record highs to $4,090. Traders have locked in partial gains following an overextended rally. However, the downside remains cushioned as fears of a prolonged trade standoff between the world's two largest economies continue to dominate market sentiment.

Gold's rally is showing no signs of slowing with the metal up more than 50% year to date and on track for its best year since 1979. The historic run is driven by expectations of two more interest rate cuts by the Fed this year, persistent geopolitical tensions, and steady central bank buying. Strong inflows into Gold-backed ETFs and recent political uncertainty in France and Japan have further boosted demand, keeping the metal's record-breaking rally well supported.

Market movers: Trade spat intensifies, global politics stir, Powell in focus

Fresh trade headlines added to the cautious tone after reports that China began imposing new port fees on US-linked ships, mirroring Washington's earlier move to levy similar charges on Chinese vessels. The tit-for-tat escalation highlights how trade tensions are spreading beyond tariffs into the maritime and logistics sectors, raising fears of broader disruptions to global trade flows.

On Tuesday, China sanctioned five United States (US) subsidiaries of South Korea's Hanwha Ocean, accusing them of aiding American investigations that undermine Beijing's interests. China's Commerce Ministry said, "Hanwha Ocean's US-related subsidiaries have assisted and supported the US government's relevant investigative activities, thereby jeopardising China's sovereignty, security, and developmental interests."

Investors are closely watching political developments in France following the abrupt resignation and swift reappointment of Prime Minister Sébastien Lecornu, who is rushing to present the 2026 budget bill to parliament in a bid to secure support from opposition lawmakers. Lecornu's new Cabinet faces an early test of confidence with the Socialist Party threatening to table its own no-confidence motion if fiscal targets are not met.

In the US, focus remains on the prolonged government shutdown, now stretching into its third week, as lawmakers prepare for another vote on a short-term funding measure later on Tuesday.
Fed Chair Jerome Powell is scheduled to speak at the National Association for Business Economics (NABE) Annual Meeting in Philadelphia at 16:20 GMT. His remarks on the economic outlook and monetary policy will be closely watched for clues on the Fed's rate-cut path ahead of the upcoming October FOMC meeting. The event marks Powell's final appearance before the pre-meeting blackout period begins on October 18.

Source: Fxstreet