Dollar Declines, Gold Soars: Market Nervousness Intensifies Amid Sino-American Tensions

Markets have been unsettled by signs of credit fragility, with two U.S. regional banks revealing bad debts, reigniting fears of tightening financing conditions. Beijing has accused Washington of fueling panic over export controls on rare earths while reaffirming its willingness to resume negotiations. In response, U.S. officials warned that these restrictions could disrupt global supply chains. This rise in tensions coincides with the ongoing paralysis of the U.S. government, which has entered its third week, delaying the release of key economic data and increasing uncertainty regarding the trajectory of monetary policy. Governor Christopher Waller expressed support for a rate cut this month, citing signs of weakening in the labor market. His colleague, Stephen Miran, advocated for a more aggressive easing approach. The Fed's Beige Book highlighted emerging economic tensions, including rising layoffs and declining spending among middle- and low-income households. These signals bolster speculation of a 25 basis point reduction at the next meeting, followed by another in December. Gold prices surged to around $4,360 per ounce on Friday, returning to a new record set earlier and on track for a strong weekly gain, the highest since March 2020, as investors sought safety amid heightened economic uncertainties. The precious metal, supported by expectations of rate cuts and a weak dollar, has risen over 60% since the beginning of the year, driven by massive purchases from central banks, inflows into ETFs, and strong demand for safe-haven assets. Global stocks were in the red on Friday, with the STOXX 50 and STOXX 600 indices losing more than 1%, while Hong Kong's Hang Seng dropped by 2.3%. In the U.S., stock futures indicated further declines at the open, reflecting a market sentiment weakened by fears of an economic slowdown and signs of banking credit tension.