A weaker US dollar is supporting gold, as the dollar index has dropped 0.6% from a recent two-week high. This decline makes gold more attractive to foreign buyers, reinforcing its safe-haven demand.
Investor sentiment is also being driven by escalating trade tensions. President Trump has threatened an additional 10% tariff on Chinese goods, which would raise cumulative tariffs to 20%. Uncertainty surrounding these trade policies is fueling demand for gold as a hedge against economic instability.
Despite gold’s retreat in the previous session, the metal’s downside remains limited due to ongoing geopolitical risks and concerns over slowing global growth.
Gold’s Outlook Hinges on US Interest Rate Expectations
Gold lost over 1% in the last session following US inflation data that suggested the Federal Reserve may not be as aggressive in cutting interest rates. Since gold does not yield interest, higher rates typically make it less appealing to investors. However, expectations around the Fed’s policy could shift again based on upcoming data releases, particularly the US payrolls report later this week.
UBS analysts remain bullish on gold, maintaining their forecast for gold to reach $3,000 this year, with the potential to hit $3,200 in risk-driven scenarios. They also see potential for silver to gain if gold consolidates and global industrial production shows signs of recovery.
