Gold surged to an unprecedented level on Monday as investors sought refuge from growing uncertainty linked to renewed US-China trade friction and mounting expectations of interest rate cuts by the Federal Reserve. Silver followed suit, also reaching a record peak.

As of 2:53 am GMT, spot gold climbed 0.7% to $4,044.29 per ounce after touching a new record of $4,059.30 earlier in the day. US gold futures for December delivery advanced 1.6% to $4,062.50.

The rally comes after US President Donald Trump announced sweeping 100% tariffs on Chinese imports and unveiled export restrictions on key software starting November 1. The measures were framed as retaliation for China’s tightening of export controls on rare earth elements and semiconductor-related materials, resources critical to the US defense and tech industries.

Beijing, which defended its restrictions as legitimate national security measures, has imposed new port fees on US-linked vessels, expanded customs inspections on AI chips and high-tech imports, and launched regulatory probes into US tech firms such as Qualcomm. These actions signal a widening economic confrontation between the world’s two largest economies.

"It’s interesting because developments in the Middle East recently had been a diminished tailwind for the gold market, but now we’ve got this reemergence of risks due to inflamed trade tensions between the US and China," Kyle Rodda, analyst at Capital.com, told Reuters.

Meanwhile, silver rose 2% to reach an all-time high of $51.52 per ounce, supported by the same macroeconomic factors as gold and a tight physical market. Goldman Sachs projected that silver could see continued price gains in the medium term, driven by investor inflows, though it cautioned that volatility and downside risks remain higher than for gold.

Golden policy crossroads

Gold has now jumped 54% since the start of the year, driven by a combination of geopolitical turmoil, robust central bank buying, and massive inflows into gold-backed exchange-traded funds. Several central banks, particularly in emerging markets, have been accelerating gold purchases as part of efforts to diversify reserves away from the US dollar, amid fears of financial instability and currency debasement.

Adding further momentum, expectations of looser US monetary policy have intensified. The Federal Reserve recently cut interest rates by 25 basis points, bringing the target range down to 4.00%-4.25%, and markets are now betting almost fully on another reduction in October, followed by a further cut in December. While some Fed officials have urged caution due to persistent inflation risks, others have signaled a willingness to ease further if growth slows or trade tensions worsen.

The Fed’s delicate balancing act is taking place against a backdrop of political pressure. Trump has repeatedly criticized the central bank for being "too slow" to support the economy, prompting warnings from financial institutions, including the Bundesbank, about potential threats to the Fed’s independence and global market confidence.

Fed Chair Jerome Powell is set to address the National Association for Business Economics (NABE) conference on Tuesday, where investors hope to gain clearer guidance on the trajectory of monetary policy. Other Fed officials, including Vice Chair Michael Barr, will also deliver remarks this week.

Read more: 'Serious danger' if Trump controls US monetary policy: ECB

Political uncertainty

Adding to the tense atmosphere, Trump blamed Democrats for the ongoing government shutdown, which began on October 1 and has led to federal layoffs and delays in key economic data releases, further clouding the market outlook.

On the international stage, world leaders, including Trump, are convening in Egypt to discuss potential ceasefire arrangements for Gaza, as geopolitical uncertainty continues to reinforce investor appetite for safe-haven assets.

In the broader precious metals market, platinum gained 2.6% to $1,628.80, while palladium matched the increase to $1,442.06.