Gold has surged to a record high, fueled by speculation that the Federal Reserve will continue monetary easing and escalating U.S.-China tensions.

The price of bullion has risen more than 6% so far this week and peaked above $4,280 an ounce on Thursday, continuing a sharp rally that began in August. This buying has also spread to other precious metals, with silver surging more than 3% on Wednesday as the London market remains tight.

Traders are betting on at least one major U.S. interest rate cut by the end of the year, while Fed Chairman Jerome Powell hinted this week that the central bank is on track for another quarter-point cut later this month.

The ongoing U.S. government shutdown has delayed the release of key data, but any resolution is expected to unleash a flood of information on developing economic conditions, which could provide evidence of weakness to support further rate cuts. This would benefit bullion, as it does not pay interest.

Gold is also supported by concerns over resurgent trade tensions, including between China and the US. A White House official said President Donald Trump will speak with his Russian counterpart, Vladimir Putin, on Thursday.

The precious metal has surged more than 60% this year, supported by central bank buying, inflows into exchange-traded funds (ETFs), and surging demand for safe-haven assets amid geopolitical and trade tensions, rising fiscal and debt levels, and threats to the Fed's independence. "Nothing has changed for me: Over the last $2,000 an ounce, we've been optimistic, and everything that got us here is still optimistic," said Michael Widmer, head of metals research at Bank of America Corp., in an interview on Bloomberg Television. However, "ETF inflows last month were up 880% year-over-year, and that's ultimately a concern," as it's unsustainable.

Meanwhile, the silver market has been gripped by a lack of liquidity in London, triggering a worldwide rush for the metal and pushing benchmark prices higher than New York futures. Prices hit a record above $53 an ounce this week.

Over the past week, more than 15 million ounces of silver have been withdrawn from warehouses connected to the Comex futures exchange in New York. Most of this is likely headed to London, which should help ease market tensions — although solid ETF inflows of nearly 11 million ounces during the period have further eroded London stocks.

Spot gold rose 1.5% to $4,272.36 an ounce at 12:36 p.m. in New York. Silver, platinum, and palladium all gained. The Bloomberg Dollar Spot Index fell 0.2%, falling for a third day. (alg)

Source: Bloomberg