Gold Surges to New Highs on Rate Cut Bets; US Earnings Offer Mixed Signals

The EUR/USD pair advanced on Tuesday as the U.S. dollar weakened following neutral-to-dovish remarks from Federal Reserve Chair Jerome Powell, while political developments in France provided additional support to the euro.

Fed Chair Jerome Powell emphasized a cautious, data-dependent stance, noting that the U.S. economy remains in a “low-hiring, low-firing” environment but that labor market risks have increased relative to inflation pressures. He described current conditions as “firmer than expected” and reaffirmed that policy decisions will continue on a meeting-by-meeting basis.

In Europe, sentiment toward the euro improved after the French government suspended its controversial pension reform, a move aimed at calming domestic unrest. The decision offered temporary relief to euro sentiment and eased concerns of broader political instability across the Eurozone.

European Central Bank President Christine Lagarde reiterated that current policy settings remain appropriate, while Governing Council member François Villeroy de Galhau said the next move by the ECB is more likely to be a rate cut than a hike.

The U.S. dollar came under renewed selling pressure after a flare-up in trade tensions between Washington and Beijing. U.S. President Donald Trump’s sharp rhetoric toward China prompted a swift response from Chinese authorities, including the introduction of new port fees on U.S. vessels.

Gold prices surged to new record highs early on Wednesday, driven by rising expectations of U.S. interest rate cuts and a renewed wave of U.S.–China trade tensions that bolstered demand for safe-haven assets.

The latest leg of gold’s rally came after Federal Reserve Chair Jerome Powell reiterated a cautious, meeting-by-meeting approach to monetary policy.

Market participants are now fully pricing in 25-basis-point rate cuts at both the October and December policy meetings, as traders increasingly anticipate a dovish policy pivot from the central bank.

Safe-haven demand was further boosted by renewed tensions between Washington and Beijing. U.S. President Donald Trump said his administration was considering cutting some trade ties with China, including in the cooking oil sector, after both nations imposed tit-for-tat port fees earlier in the week.

Bullion has surged nearly 59% so far this year, supported by a confluence of factors — including geopolitical uncertainty, expectations of U.S. rate cuts, robust central bank purchases, ongoing de-dollarization trends, and strong exchange-traded fund inflows.

Gold typically performs well in a low-interest-rate environment and during periods of political or economic instability, as lower yields reduce the opportunity cost of holding the non-yielding metal.

Oil prices declined sharply on Tuesday, falling to five-month lows after the International Energy Agency (IEA) warned that global crude markets could face a massive supply surplus in 2026. Persistent U.S.–China trade tensions also weighed on sentiment, raising concerns over energy demand from the world’s two largest economies.

The IEA said the global oil market could swing into a surplus of up to 4 million barrels per day in 2026, as OPEC+ producers and non-OPEC rivals ramp up production amid sluggish demand growth.

By contrast, a monthly report from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, offered a somewhat less bearish outlook, predicting that supply tightness could ease gradually as output increases next year.

Adding to bearish sentiment, U.S.–China relations deteriorated further, clouding the global demand outlook. U.S. President Donald Trump confirmed plans to meet Chinese President Xi Jinping in South Korea later this month in an effort to ease tensions over tariffs and export restrictions, but the situation remains fragile.

Crude prices are likely to remain under pressure in the near term as supply forecasts rise and macroeconomic risks persist. Market participants will closely watch the upcoming OPEC+ meeting and U.S. inventory data for fresh signals on whether producers plan to adjust output to stem the recent decline in prices.

U.S. stocks fell on Tuesday, closing lower after a volatile session marked by renewed U.S.–China trade tensions and comments from Federal Reserve Chair Jerome Powell signaling a potential shift in monetary policy.

Trade concerns resurfaced after President Donald Trump accused China of refusing to buy U.S. soybeans, calling the move “an economically hostile act.” Speaking on Truth Social, Trump said he was considering “terminating business” with China related to cooking oil, adding that the U.S. could “easily produce cooking oil ourselves.”

Meanwhile, Federal Reserve Chair Jerome Powell said the central bank is nearing the point where it must consider ending its quantitative tightening (QT), or bond-reduction program.

On the earnings front, JPMorgan Chase reported better-than-expected profit and revenue, supported by a rebound in dealmaking activity that lifted investment banking fees 16% year-on-year. The segment’s net revenue rose 17% to $19.88 billion, while net income increased 21% to $6.9 billion.

However, JPMorgan shares slipped as the bank boosted provisions for potential credit losses. CEO Jamie Dimon warned of a “heightened degree of uncertainty” stemming from geopolitical tensions, trade disputes, elevated asset prices, and a weakening U.S. jobs market.

Wells Fargo also beat expectations, posting earnings per share of $1.66 on revenue of $21.44 billion, exceeding forecasts of $21.16 billion. Shares gained more than 3%, supported by broad-based growth across consumer and commercial units. Bank of America and Morgan Stanley are scheduled to report results on Wednesday.