US-China Tensions: Gold Surges To Record High While Oil Rebounds 1%

Gold prices surged to a record high on Monday, 13 October 2025, driven by intensifying US-China trade tensions and renewed expectations that the US Federal Reserve could cut interest rates this year (The Economic Times). Meanwhile, crude oil stages a modest comeback to gain around 1%, recovering some ground after steep losses last week as investors eyed cues from potential diplomatic overtures.

The persistent rally in gold prices stretched into its eighth consecutive week, with prices hitting a fresh all-time high of ₹1,23,677 per 10 grams in India on Monday. This is after gaining around 2.9% during the last week (Livemint). In global markets, spot gold breached the $4,000-per-ounce milestone for the first time, surging to a record high of $4,059.30 per ounce.

Meanwhile, silver also scaled new highs, with spot silver gaining nearly 2% to $51.52 per ounce amid tight supply and frantic investor demand (Reuters).

What’s Fuelling Gold Price Hike?

The persistent rally in gold price is being fuelled by a number of macroeconomic factors, including the US tariff war, central banks’ move to diversify away from the US dollar, monetary easing by the US Federal Reserve, heightened geopolitical tensions, and the prolonged US government shutdown.

1. Calls For a Safe Haven Amid Ongoing Tariff War

The ongoing US tariff war took a new turn when the U.S. President Donald Trump imposed 100% tariffs on Chinese imports, accusing Beijing of attempting to monopolise rare earth supplies (Livemint). The move reignited fears of a renewed US–China trade war, a scenario where investors typically look to diversify their investments towards safe havens such as gold and silver. An increased demand for precious metals across the globe resulted in relentless price hikes in the last few weeks.

2. Speculations of US Federal Rate Cuts

Investors are betting on at least one or two rate cuts by the U.S. Federal Reserve in the near term. Minutes of recent FOMC (Federal Open Market Committee) meetings showed dovish undertones, reinforcing hopes of easing (Livemint). There are renewed expectations of rate cuts during the upcoming October meeting. Lower rates reduce the opportunity cost of holding non-yielding assets like gold.

3. De-Dollarisation by Central Banks

In a bid to reduce their dependence on the US Dollar, Central Banks across the world, especially in emerging markets, are aggressively adding to their gold reserves. This institutional demand adds depth to the rally, making it less reliant on speculative flows.

4. Global Economic Unease Due to US Shutdown

The ongoing US Government shutdown has stretched into its second week, creating an environment of global economic unease. As per the estimates, the US economy is currently losing around $7 billion in output each week, a figure that could surge to $15 billion if the impasse continues (Livemint). This policy paralysis has intensified concerns over a potential broader economic slowdown, further boosting safe-haven demand for gold.

5. Technical Momentum and Inflows

As gold breaks through resistance zones, momentum traders and trend followers are piling in. Meanwhile, gold ETFs (Exchange-Traded Funds) in India are seeing record inflows. According to the World Gold Council, Indian gold ETFs recorded $902 million inflow in September, a leap of 285% over August, pushing aggregate holdings to 77.3 tonnes (Livemint). The global sector also reported its strongest quarterly inflow ever (about US$26 billion).

Market Outlook: Can The Momentum Sustain?

The gold rally appears to have legs in the near term, supported by ongoing geopolitical uncertainty, dovish rate expectations, and institutional demand. Some analysts are lifting gold targets closer to $4,900-per-ounce for 2026. However, the investors need to be aware of a few signs that could challenge the upside:

• Dollar Rebound Risk

The U.S. dollar index has retraced from lows to all-time highs, triggering some profit-taking in bullion positions.

• Resistance and support levels

Analysts see immediate resistance zones around $4,120 to $4,150 per ounce internationally and ₹1,25,000 to ₹1,27,000 per 10 grams domestically. Prices could rebound once they touch these levels (Livemint).

• Profit-making and Corrections

With the Israeli Government approving a ceasefire with Hamas, it could signal a potential easing of geopolitical tensions. This could pave the way for intermittent pullbacks or consolidation phases in gold prices.

Conclusion

Gold’s rally in 2025 is historic. With a near 58% year-to-date gain, it’s the best performance since 1979. Yet, this strength has been nurtured by trade fear, Fed expectations, central bank demand, and safe-haven chasing amid U.S. political gridlock. Investors can continue to ride the momentum, but should remain aware of a few signs that could challenge the upside.