Gold prices increased on Friday, heading to their first monthly gain since January on increased safe-haven demand, after U.S. President Donald Trump vowed to impose tariffs on all Mexican imports, increasing up worries of a worldwide financial slowdown.
The new threat of tariffs on Mexico, coupled with a thread of soggy financial data from the United States this month and the long-tense Sino-U.S. trade spat, also turned into increased bets that the U.S. Federal Reserve could cut interest rates this year.
Spot gold increased 0.2 percent at $1,290.68 per ounce. It has climbed around 0.6 percent so far this month.
The metal increase 0.4 percent above the week and it is also on track for a second consecutive weekly gain. U.S. gold futures soared 0.3 percent to $1,290.50 an ounce.
An exasperated Trump on Thursday vowed to impose a tariff on all goods coming from Mexico beginning at 5 percent and ratcheting higher up to the flow of illegal immigrants into the United States come to an end.
In other news, Asian shares and sovereign bonds dropped as investors feared the move risked tipping the United States, and possibly the whole world, into slump.
“Donald Trump’s (threat) about U.S. tariffs on Mexico, sparked some fears in the market. And if the whole U.S. and China negotiation is any example this can drag much longer.” analysts said.
“With this kind of push from the Trump administration we will see whether or not the Fed will continue to have that flexibility to retain its wait and see approach.”
Lower interest rates would support gold since it lessens the chance cost of holding the non-yielding asset.
Data showed that U.S. inflation was much frailer than originally thought in the first quarter in a sharp stoppage in local demand, which might cast doubts on the Fed’s view that the benign price pressures were generally due to brief factors.
However, the dollar index was on track for a 0.5 percent increase this week supported by weakness in peers, and the U.S. currency’s own status as a safe-haven in times of market and financial worries.
“Over the near term, a strong dollar will weigh down on commodities in general,” said Heng Koon How, head of markets strategy, United Overseas Bank.
“But our long term view is that gold will recover to $1,450 an ounce by middle of 2020 as safe haven in-flows and portfolio diversification needs increase to gold’s advantage.”
Silver edged 0.1 percent lower to $14.49 per ounce and was heading for fourth straight monthly loss.
Platinum was firm at $792.14 per ounce, having tumbled to its lowest level since Feb. 15 at $784.42 in the preceding session. The metal was on track for its largest monthly loss since Nov. 2015, drop 10.8 percent to this point.
Palladium shed 0.4 percent to $1,362.45 per ounce, not distant a peak since May 1, at $1,380.75 it moved in the preceding session.