Gold Price Forecast: XAU/USD refreshes four-week high as Sino-US trade worries fuel safe-haven demand

LONDON (June 5) Gold price (XAU/USD) posts a fresh four-week high, advances to near $3,400 during European trading hours on Thursday. The yellow metal strengthens as uncertainty over potential trade deal between the United States (US) and China has accelerated, technically increasing the demand for safe-haven assets.

On Wednesday, US President Donald Trump signaled in a post on Truth.Social that a trade deal with Beijing is very difficult. "I like President Xi of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!" Trump wrote.

Another reason behind strength in the Gold price is the significant decline in the US bond yields. Theoretically, lower yields on interest-bearing assets increase demand for non-yielding assets, such as Gold. 10-year US Treasury Yields have extended their downside to near 4.35%, the lowest level seen in four weeks.

US bond yields tumbled on Wednesday after an array of disappointing US economic data, notable a sharp slowdown in the private sector labor demand. The ADP reported that the private sector added 37K fresh workers, which were lowest since January 2021. Additionally, the ISM Services PMI report indicated an unexpected decline in the service sector activity and poor demand outlook.

Soft US data has led to a slight increase in dovish expectations for the Federal Reserve’s (Fed) July policy meeting. According to the CME FedWatch tool, the probability for the Fed to reduce interest rates in July has increased to 30% from 22.5% seen a week ago.

Lower interest rates by the Fed bode well for non-yielding assets, such as Gold.

FXStreet