Gold retains bullish bias amid economic risks, dovish Fed, weaker USD
US President Donald Trump threatened on Tuesday to terminate trade with China in cooking oil and other products in response to the latter's decision not to purchase US soybeans. China also announced new special port fees for US ships arriving in Chinese ports and enhanced restrictions on the export of rare earths.

This marks a significant escalation of the trade war between the world's two largest economies. Adding to this, geopolitical risks and concerns that the US government could affect the economic performance drive safe-haven flows towards the Gold, pushing it to a fresh record high during the Asian session on Wednesday.

The International Monetary Fund edged up its 2025 global growth forecast for the second time since April, to 3.2% from 3.0% in July, but warned that a renewed US-China trade war could slow output significantly. The IMF further added that the Trump administration's tariffs have so far proved less disruptive than expected.

Media reports suggest that Trump was considering sending the US-made Tomahawk long-range cruise missiles to Ukraine to pressure Russian President Vladimir Putin into negotiations. This keeps geopolitical risks in play and turns out to be another factor that contributes to the precious metal's strong move up.

Meanwhile, the latest vote on the Republican-backed stopgap funding bill to end the partial federal government shutdown fell short of the votes needed for passage in the Senate on Tuesday. This means that the US shutdown, which started on October 1, will extend into a third week, with no resolution in sight.

US Federal Reserve Chair Jerome Powell did not provide specific guidance on interest rates on Tuesday, though comments about weakness in the labor market suggested that further easing is firmly on the table. Moreover, other Fed officials have pointed to the likelihood of additional rate cuts moving ahead.

According to the CME Group's FedWatch Tool, traders have fully priced in a 25-basis-point rate cut in October and see a 90% chance that the US central bank will lower borrowing costs again in December. This exerts pressure on the US Dollar for the second straight day and benefits the non-yielding yellow metal.

Given that important US macro releases have been delayed due to the government closure, the market focus will remain glued to speeches from influential FOMC members. This would play a key role in driving the USD demand, which, along with trade developments, should provide some impetus to the commodity.

Source: Fxstreet