The weaker US dollar supports gold as the Dollar Index has dropped by 0.6% from its recent two-week high. This decline makes gold more attractive to foreign buyers and strengthens the safe haven demand.
Investor sentiment is also driven by an escalating trade tension. President Trump threatened a 10% tariff on Chinese goods, increasing cumulative tariffs to 20%. The uncertainty surrounding these trade policies is to promote the demand for gold as a hedge against economic instability.
Despite Gold's retreats in the previous session, the downsides of metals remain limited due to concerns about geopolitical risks and slowing global growth.
The gold outlook depends on US interest rate expectations
Gold lost more than 1% in the last session, following US inflation data that suggested the Federal Reserve was less aggressive in cutting interest rates. Since interest does not bring about interest, higher rates usually make them less attractive to investors. However, expectations regarding the Fed's policy could change again based on upcoming data releases, particularly US pay reports later this week.
UBS analysts remain bullish on gold, maintaining this year's gold forecast at $3,000, potentially reaching $3,200 in a risk-driven scenario. They also believe that silver could win if gold is integrated and global industrial production shows signs of recovery.
