Gold (XAU/USD) advanced above the $4,100 level during early European trade on Thursday, supported by growing caution ahead of the key US Consumer Price Index (CPI) inflation report. Heightened geopolitical tensions and the prolonged US government shutdown have boosted demand for the safe-haven metal, while increasing speculation of further Federal Reserve interest rate cuts continues to underpin its strength. Lower rates typically reduce the opportunity cost of holding non-yielding assets like gold.
Market participants are also watching developments in the US-China trade relationship closely. Trade officials from both nations are expected to meet later this week before a planned discussion between Chinese President Xi Jinping and US President Donald Trump next week.
Gold recently faced a sharp correction as easing US-China tensions and renewed demand for the US Dollar triggered profit-taking ahead of Friday’s inflation data. Analysts also noted that the end of India’s Diwali festival — a major period for gold purchases — could dampen physical demand in the world’s second-largest consumer, potentially limiting near-term price gains.
With much of the US economic data delayed due to the government shutdown, the CPI report has drawn extra attention. A stronger-than-expected reading could bolster the USD and temporarily weigh on gold prices.
Daily Market Highlights
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US-China Trade Tensions: Reuters reported that Washington is considering restrictions on a wide range of technology exports to China, including laptops and jet engines, in response to Beijing’s rare earth export controls.
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Historic Gold Rally: Gold has surged more than 50% so far in 2025, outpacing gains seen after major crises such as 9/11, the 2008 financial crash, and the Covid-19 pandemic.
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US Shutdown Drags On: The US government shutdown has now entered its fourth week — the second-longest in history — with no breakthrough in sight. The Senate is preparing another vote on a funding bill, though prospects for passage remain slim.
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Trump on Trade Talks: President Trump confirmed plans for a “long meeting” with President Xi in South Korea, expressing optimism about progress.
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Market Analyst View: “The sell-off appears largely technical, driven by profit-taking after overbought conditions since September. Despite the correction, gold remains up around 55% this year, and the broader bullish trend is intact,” said Russell Shor, Senior Market Analyst at Tradu.com.
According to LSEG data, Fed funds futures indicate a 97% probability of a 25-basis-point rate cut, reflecting market expectations that monetary easing will continue to support gold’s long-term rally.
