A weaker US dollar supports gold because the dollar index has fallen by 0.6% compared to a recent high of two weeks. This decline makes gold more attractive for foreign buyers, which strengthens the demand for safe haven.
Investor sentiment is also powered by escalating trade tensions. President Trump has threatened an extra rate of 10% on Chinese goods, which would increase the cumulative rates to 20%. Uncertainty surrounding this trade policy feeds the demand for gold as a cover against economic instability.
Despite Gold’s retreat in the previous session, the disadvantage of the metal is limited due to constant geopolitical risks and worries about delaying worldwide growth.
Gold’s prospects depends on the expectations of the American interest rate
Gold lost more than 1% in the last session after American inflation data that suggested that the Federal Reserve may not be that aggressive in reducing interest rates. Because gold does not yield interest, higher rates usually make it less attractive for investors. However, the expectations of the FED policy can shift again on the basis of upcoming data releases, in particular the US Payrolls report later this week.
UBS analysts continue to bullish on gold and maintain their prediction for Gold to reach $ 3,000 this year, with the potential to reach $ 3,200 in risk-driven scenarios. They also see potential for silver to win when gold consolidates and worldwide industrial production shows signs of recovery.