Gold prices in Oman on Wednesday
24-karat: RO52.850
22-karat: RO49.300
21-karat: RO46.050
18-karat: RO39.250
"The U.S. government shutdown and dovish comments from Jerome Powell have provided the latest reasons for gold prices to accelerate higher," said StoneX senior analyst Matt Simpson.
Federal Reserve Chair Jerome Powell said the U.S. labour market remained subdued, though the economy "may be on a somewhat firmer trajectory than expected."
Powell said interest rate decisions would be made on a "meeting-by-meeting" basis, balancing labour market weakness with persistent inflation above target.
Investors are pricing in a near-certain chance of a 25-basis-point Fed rate cut in both October and December.
Bullion tends to do well in a low-interest-rate environment and during times of political and economic uncertainty.
Safe-haven gold has gained 59% year-to-date, driven by multiple factors, including geopolitical and economic uncertainties, expectations of U.S. rate cuts, strong central bank buying, de-dollarisation trend, and robust exchange-traded fund inflows.
"This rally has also become a momentum trade, where traders pile in simply to chase prices getting away from them," Simpson said.
Trump said Washington was considering cutting some trade ties with China, including in cooking oil. Both countries began imposing tit-for-tat port fees on Tuesday.
The International Monetary Fund raised its 2025 global growth forecast, citing better-than-expected tariff and financial conditions, while cautioning that renewed U.S.-China trade tensions could curb growth.
Socks jumped and the dollar retreated on Wednesday as trade war fears were overshadowed by comments from Federal Reserve boss Jerome Powell that suggested the bank would cut interest rates again this month.
After a volatile couple of days characterised by a fresh flare-up in China-US tensions, investors took the opportunity to jump back into the market and resume a months-long, tech-fuelled rally.
Powell has for most of the year walked a fine line between trying to keep a cap on US inflation while also supporting the labour market, even as he faced a barrage of abuse from President Donald Trump for not lowering borrowing costs soon enough.
And while price gains continue to outpace the bank's target pace, a series of weak readings has forced him to turn his focus on jobs, and last month announced the first rate cut since December.
And on Tuesday, he indicated more were on the way.
"In this less dynamic and somewhat softer labour market, the downside risks to employment appear to have risen," said Powell, adding that longer-term inflation expectations remained aligned with the Fed's two-percent goal."Rising downside risks to employment have shifted our assessment of the balance of risks," he said, adding there was "no risk-free path for policy as we navigate the tension between our employment and inflation goals."
Powell also hinted that monetary policymakers could soon stop reducing the size of its holdings of bonds and other instruments bought in vast quantities during the pandemic to keep borrowing rates low and support the economy.
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