Gold rose to a record

as heightened

United States-China frictions

and bets that the U.S. Federal Reserve will press on with

monetary easing

supported demand.

Bullion has risen

more than five per cent so far this week and

touched a peak above US$4,243 an ounce

on Thursday, extending a breakneck rally that began in August. The buying spree has spread to

other precious metals

, with silver surging more than three per cent on Wednesday as the London market remained tight.

Traders are piling into wagers on at least one outsized U.S. rate cut by year-end, while Fed Chair Jerome Powell signalled this week the central bank is on track to deliver another quarter-point reduction later this month. Lower borrowing costs tend to benefit precious metals, which don’t pay interest.

President Donald Trump declared Wednesday that the U.S. was now locked in a trade war with China, spurring fears of prolonged damage to the global economy that could boost gold’s haven appeal.

The ongoing U.S. government shutdown has also aided bullion, as has the so-called debasement trade, where investors pull away from sovereign debt and currencies to protect themselves from runaway budget deficits.

Enthusiastic central-bank buying

and inflows to

exchange-traded funds

have also underpinned gold’s 60 per cent surge this year.

“Nothing has changed for me: For the last US$2,000 per ounce we’ve been bullish and everything that’s taken us here is still bullish,” Michael Widmer, head of metals research at Bank of America Corp., told Bloomberg Television. Nevertheless, “ETF inflows last month were up 880 per cent year-over-year and that is ultimately a concern,” since it is unsustainable.

The silver market, meanwhile, has been gripped by a lack of liquidity in London, sparking a worldwide hunt for the metal and driving benchmark prices to soar above futures in New York. Prices touched a record above US$53 an ounce this week, before edging lower on Thursday.

Over the past week, more than 15 million ounces of silver have been withdrawn from warehouses linked to the Comex futures exchange in New York. Much of that is likely headed to London, where it should help ease market tightness — though solid ETF inflows of almost 11 million ounces over that period have further eroded London stocks.

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Spot gold was up 0.8 per cent at US$4,241.20 an ounce as of 11:16 a.m. in London. Silver edged lower. Palladium and platinum gained.

Bloomberg.com