Gold gains as trade tensions and US inflation data keep investors on edge

Gold prices rose on Tuesday as investors sought safe-haven assets amid mounting global trade tensions, while markets looked ahead to key US inflation data that could shape the Federal Reserve’s next interest rate move. Spot gold climbed 0.5 per cent to $3,359.01 per ounce as of 0635 GMT, while US gold futures gained 0.3 per cent to $3,368.20, according to Reuters.

The precious metal’s steady rise underscores its traditional role as a hedge during geopolitical and trade-related uncertainty, with market watchers closely tracking President Donald Trump’s escalating tariff threats against major trading partners.

Tariff tensions drive safe-haven demand

US President Trump on Saturday threatened to impose a 30 per cent tariff on imports from Mexico and the European Union from August 1 if no trade deal is reached, intensifying fears of a fresh trade war that could dent global economic growth.

Tim Waterer, Chief Market Analyst at KCM Trade, told Reuters that, “Gold has shown in the past that it is an asset of choice when tariff tensions are ratcheted up, and the precious metal’s move towards $3,350 is evidence of this pattern playing out again”. However, Waterer also cautioned that higher US Treasury yields, and a stronger dollar were creating headwinds for further gains, suggesting gold would need a retreat in yields or the dollar to break decisively towards $3,400.

Inflation data in focus

Investor attention is now squarely on the release of June’s US Consumer Price Index (CPI) data due later on Tuesday. A Reuters poll of economists expects annual headline inflation to have risen to 2.7 per cent in June, up from 2.4 per cent in May. Core inflation, which excludes volatile food and energy prices, is projected to climb to 3.0 per cent from 2.8 per cent.

The inflation reading will be closely watched for clues about the Federal Reserve’s next move, as markets currently expect 50 basis points of interest rate cuts before the end of the year, with the first reduction anticipated in September.

Trump on Monday renewed his attacks on Fed Chair Jerome Powell, arguing that interest rates should be 1 per cent or lower, further fuelling debate about the central bank’s future policy path. Gold traditionally performs well in a low interest rate environment, as lower yields reduce the opportunity cost of holding the non-yielding asset.

Silver shines amid supply fears

Elsewhere in precious metals, spot silver also gained 0.5 per cent to $38.32 per ounce after hitting its highest level since September 2011 on Monday.

Waterer told Reuters that silver was benefiting not only from gold’s broader rally but also from its own supply concerns and strong industrial demand that, “Also, gold’s rise over the past 18 months has had investors looking elsewhere for value and silver has been one of the metals to rise as a result.”

Broader precious metals market rises

Platinum rose 1.1 per cent to $1,379.22 per ounce, while palladium gained 0.5 per cent to $1,200.01, according to Reuters data.

As the global economy faces trade disputes, tariff threats and persistent inflation concerns, the broader precious metals market continues to find support among investors hedging against uncertainty.