Gold hits three-week high as Trump widens trade war

NEW YORK: Gold prices touched a three-week high on Monday, supported by safe-haven demand after US President Donald Trump threatened to impose a 30 per cent tariff on imports from the European Union and Mexico.

Spot gold was up 0.5 per cent to US$3,371.34 per ounce, as of 0045 GMT, its highest since June 23. US gold futures climbed 0.7 per cent to US$3,386.20.

Trump on Saturday threatened to impose a 30 per cent tariff on imports from Mexico and the European Union starting on Aug 1, after weeks of negotiations with the major US trading partners failed to reach a comprehensive trade deal.

Both the European Union and Mexico described the tariffs as unfair and disruptive, while the EU said it would extend its suspension of countermeasures to US tariffs until early August and continue to press for a negotiated settlement.

Investors now await the US inflation data for June due on Tuesday for more cues on the Federal Reserve's interest rate path. Markets are currently pricing in just over 50 basis points worth of Fed easing by December.

Chicago Fed Bank President Austan Goolsbee said the new tariffs unveiled by Trump could spark fresh concerns about inflation, which might force the Fed to maintain its wait-and-see posture, The Wall Street Journal reported on Friday.

Gold, often considered a safe-haven asset during economic uncertainties, tends to do well in a low-interest-rate environment.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.12 per cent to 947.64 metric tonnes on Friday from 948.80 tonnes on Thursday.

Meanwhile, gold speculators cut net long positions by 1,855 contracts to 134,842 in the week to July 8.

Spot silver gained 0.4 per cent to US$38.49 per ounce, platinum fell 1.1 per cent to US$1,384.00 and palladium slipped 1.7 per cent to US$1,194.40.

Read More: Here