Gold holds firm as geopolitical risks and Fed bets support gains

Gold prices are flat in early Thursday trading, consolidating above the $3,350 level and maintaining the gains recorded in the previous session. Risk appetite in the financial markets has eased somewhat following comments by Donald Trump on Wednesday, in which he stated that his administration is preparing to set unilateral tariff rates on trading partners. The remarks tempered optimism sparked by the apparent handshake agreement reached between the US and China after two days of talks, where both sides agreed, for now, to leave tariffs unchanged. At the same time, geopolitical tensions are intensifying. Reports suggest that Israel may be preparing to launch an attack on Iran, while Russia has escalated its bombing campaign against Ukrainian cities. This rise in global uncertainty is lending support to gold, enhancing its haven appeal.

Meanwhile, US inflation data for May, released on Wednesday, showed a rise compared to the previous reading but came in below expectations. This has fuelled speculation that the Federal Reserve may cut interest rates in September, placing pressure on the US dollar, which weakened against other major currencies. Given the inverse correlation between gold and the dollar, this dynamic supports gold prices. Looking ahead, there may be further upside potential for gold, particularly if today’s US producer price inflation data also underperforms forecasts, potentially triggering additional dollar losses and further strengthening the appeal of the precious metal.

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