Gold Surges As U.S.-China Relations Move Back And Forth

(RTTNews) - Gold prices soared on Thursday after two days of steep decline as U.S.-China tensions heated up again following a few days of cooling off even while investors await key U.S. inflation data to be released tomorrow.

Front Month Comex Gold for October delivery jumped by $81.10 (or 2.01%) to $4,125.50 per troy ounce.

Front Month Comex Silver for October delivery also jumped by $1.0210 (or 2.15%) to $48.482 per troy ounce.

The U.S.-China trade friction has been seesawing over the past few weeks.

In September, the U.S. Commerce Department expanded its export controls to block China from accessing cutting-edge chips.

China hit back with measures to curb its rare earth mineral exports. China holds a near-monopoly in rare earth metals, accounting for nearly 70% of global output. In 2024, China produced about 270,000 tons of rare earths and held an estimated 44 million tons in reserves.

Displeased by China's measures, U.S. President Donald Trump threatened a new 100% tariff to all Chinese exports to the U.S. bringing China's cumulative tariffs to around 155%.

Trump also announced that the U.S. may add export controls on "all critical software" to China.

China halted all soybean imports from the U.S., leaving U.S. farmers struggling with their harvest.

Rising tension between the world's two powerful nations benefitted gold prices as investors shied away from riskier assets.

Last weekend, Trump appeared to give diplomacy more room. Admitting that high tariffs on China were non-sustainable, Trump acknowledged that China was already paying a tremendous amount of money to the U.S. and that both countries cannot do business without each other.

In addition, Trump confirmed that he would be meeting Xi Jinping in South Korea later this month to discuss a trade deal framework.

These developments indicated easing of trade tension between the world's two largest economies, which brought cheer to markets. As a result, the yellow metal lost some sheen.

Yesterday, however, U.S. Treasury Secretary Scott Bessent, who is set to meet Chinese Vice President He Lifeng in Malaysia to clear the ground for both presidents to meet later in South Korea, did not rule out export controls if the talks fall through. Bessent stated, "Everything is on the table."

Trump had announced recently that he is preparing to meet Russian President Vladimir Putin in Budapest, Hungary. The leaders were set to discuss ways to end the ongoing Russia-Ukraine war.

But then, Trump suddenly called off the meeting, stating that he did not want to waste time.

To dent Russia gaining billions of petrodollars, the U.S. Treasury Department announced new sanctions targeting Russian oil majors, Rosneft and Lukoil along with some of their subsidiaries. Both these corporations export around 3.1 million barrels of crude oil per day and are worth $50 billion each. They are among the biggest companies listed on the Moscow Stock Exchange.

The European Union on its part has adopted the 19th sanctions package against Russia.

The uncertainty about U.S.-China relations as well as the U.S. distancing from Russia aided the precious metal today.

In the U.S., the government shutdown entered day number 23.

Yesterday, the Senate failed for the 12th time to approve a House-passed bill to fund the government.

The Senate is set to vote today on a bill (Shutdown Fairness Act), backed by a Republican, to pay some federal workers working through the shutdown.

In an economy hit hard by the tariff war, 750,000 furloughed workers are facing joblessness.

U.S. Treasury Department data showed that the gross national debt of the U.S. has surpassed $38 trillion for the first time.

On the economic front, the U.S. Bureau of Labor Statistics is set to release September's Consumer Price Index tomorrow, originally scheduled for the September 15.

According to CME Group's FedWatch Tool, investors are betting on 98.9% chances of a 25-basis-point interest rate cut in the upcoming October 28-29 Federal Reserve's meeting.

Ongoing global trade uncertainty, the U.S.-Russia standoff, the U.S. shutdown, and the upcoming Fed decision are all set to impact gold prices in the next few days.