Gold hits record high over $3,500

Gold prices surged to an all-time high on Tuesday, eclipsing the previous record set in April following the US administration's “liberation day” tariffs under US president Donald Trump. Tuesday's rally was fuelled by a combination of a weaker US dollar and growing expectations that the Federal Reserve will reduce interest rates later this month.

At the time of writing, gold futures rose 1.1% to $3,554.90 per ounce, while the spot price of gold rose 0.9% to $3,508.70 a troy ounce during early trading in Asia, before paring gains to trade at $3,483.00.

Market sentiment remains heavily influenced by speculation of a Federal Reserve rate cut in September. According to the CME FedWatch tool, there is currently a 90% probability of a 25-basis-point cut. The softer US dollar has also made gold more attractive to foreign investors, further fuelling the metal's price climb.

Investor sentiment has been further shaken by growing concerns over the Federal Reserve's independence. Trump has repeatedly criticised Fed chairman Jerome Powell, and recently threatened to dismiss governor Lisa Cook, leading some to question the central bank's autonomy. The ongoing pressure has raised concerns about the future direction of US monetary policy.

This uncertainty has driven an increased demand for gold-focused exchange-traded funds (ETFs), which, in turn, has supported the broader rally in the precious metal. Additionally, some central banks have been quietly adding to their gold reserves, signalling growing global interest in the asset as a hedge against economic uncertainty.

“Gold has recorded a fresh all-time high, while silver currently trades at levels last seen nearly a decade and a half ago. Foreign central bank demand – reflecting a broader shift away from traditional safe-haven US Treasuries – continues to drive gold ever higher,” Nick Cawley, contributing analyst for Solomon Global, said.

Worries about inflation have also lifted demand for gold, as Tony Sycamore, IG analyst, said: “This week’s rally in gold and silver began mid-morning yesterday and coincided with a social media post by US president Trump who claimed that prices in the USA are “WAY DOWN” with virtually no inflation.

“However, this narrative contrasts with recent economic data showing persistent inflationary pressures remain and comes as president Trump continues his dovish reshaping of the Fed Board as he pushes for sooner and deeper Fed interest rate cuts, into an economy which is growing at ~3.5% in Q3 according to the latest Atlanta Fed GDP Now reading.”

Oil prices spiked on Tuesday amid growing concerns over potential supply disruptions, as the conflict between Russia and Ukraine escalated.

Brent (BZ=F) crude futures jumped 1.9% to trade at $68.73 per barrel at the time of writing, while West Texas Intermediate (CL=F) futures surged by 2% to $65.25 a barrel.

The uptick in oil prices came as Kyiv intensified its attacks on Russian refineries over the weekend, following a series of Russian strikes on Ukraine’s energy infrastructure. Fuel shortages have already plagued some parts of Russia since August, exacerbating fears of further disruptions.

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Reuters said that recent Ukrainian drone strikes had shut down facilities responsible for processing at least 17% of Russia’s oil capacity, or roughly 1.1 million barrels per day. This has raised alarms in global markets about the potential for long-term supply tightness.

“Ongoing risks to energy infrastructure in Russia remain high. Ukraine struck more Russian oil refineries over the weekend as it ramped up its attacks on infrastructure,” said Daniel Hynes, senior commodity strategist at ANZ, in a note.

The heightened geopolitical tensions come as the Organisation of the Petroleum Exporting Countries (OPEC+) is set to meet this weekend to discuss its output strategy for October, and most market watchers expect that the group will opt to keep supply steady.

The pound came under pressure in early European trading on Tuesday, with a sharp rise in UK bond yields rekindling concerns about the government's upcoming autumn budget.

Sterling slipped 0.7% against the US dollar, trading at $1.3441, and lost 0.5% versus the euro, falling to €1.1509. It is now on track for its worst day in almost three months.

The spike in bond yields was triggered by a minor reshuffle at Downing Street, which has led to an expected rise in borrowing costs. This, in turn, is putting additional strain on chancellor Rachel Reeves' fiscal headroom as she prepares for the budget announcement.

As UK bond yields approached a new 27-year high, investor appetite for the pound remains subdued and marks a three-day slide for the currency.

The 30-year gilt yield has risen to 5.672% in early trading, over the previous 27-year high set in April. Yields measure the interest rate which an investor receives for holding a bond, and rise when the price of a bond falls.

The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, gained 0.4% to 98.18.

In equities, the FTSE 100 (^FTSE) was lower on Tuesday morning, down 0.3% to trade at 9,167 points. For more details, on market movements check our live coverage here.

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