Gold: XAU/USD rallies further to near $4,240 due to multiple tailwinds

LONDON (October 16) Gold price (XAU/USD) extends its rally to near $4,240 during the European trading session on Thursday. The precious metal continues to move higher amid firm Federal Reserve (Fed) dovish bets and ongoing trade tensions between the United States (US) and China.

Traders are increasingly confident that the Fed will loosen monetary conditions further amid growing concerns over US labor market conditions.

According to the CME FedWatch tool, traders see a 94.6% that the Fed will reduce interest rates by 50 basis points (bps) to 3.50%-3.75% in the remaining year.

Meanwhile, Federal Open Market Committee (FOMC) members, including Chair Jerome Powell, have also warned on downside labor market risks. On Tuesday, Fed’s Powell stated that “downside risks to the US job market have risen”, which justified the rate cut decision in September.

Theoretically, lower interest rates by the Fed bode well for non-yielding assets, such as Gold.

On the global front, escalating US-China trade frictions are also supporting the Gold price’s rally. Lately, US President Donald Trump announced additional 100% tariffs on China over Beijing’s export controls on rare earths and magnets.

The scenario of geopolitical tensions improves the appeal of safe-haven assets, such as Gold.

FXStreet