The yellow metal regained its price above the $4,000 level at the beginning of the week, driven by escalating tensions between the United States (US) and China, anticipation of the US government reopening, and market focus on key economic data that will guide the Federal Reserve’s (Fed) interest rate decision at its upcoming meeting.
At 9.20 am, gold was at $4,044, up 0.66% since opening early Monday in Asian trading.
The rise in XAU/USD was supported by US President Donald Trump’s decision to impose a new 100% tariff on imports from China starting November 1.
China warned the US that it would retaliate if Trump did not withdraw the threat of high tariffs.
In addition, the market expects the Fed to cut interest rates by 25 basis points (bps) at its October and December meetings.
According to CME FedWatch, there is a nearly 97% probability that the US central bank will cut rates by 25 basis points at its October meeting, while the likelihood of another cut in December is around 92%.
Lower interest rates typically reduce the opportunity cost of holding gold, thus supporting the rise in the precious metal's price.
For now, market players are awaiting more clues from the US Retail Sales and Producer Price Index (PPI) reports due out on Thursday.
Any sign of higher inflation in the US could strengthen the US dollar (USD) and put pressure on gold commodity prices throughout the week.
