Gold rises on broad USD weakness as geopolitcal and tariffs fears mount

NEW YORK (June 2) Gold prices rallied sharply on Monday, reaching their highest level in over four weeks, as geopolitical risks escalated over the Russia-Ukraine conflict. Renewed tensions on trade between the United States (US) and China prompted investors to buy the yellow metal throughout the day. At the time of writing, XAU/USD trades at $3,377, up by 2.70%.

Market sentiment shifted sour as news broke that Ukraine staged an aerial attack on Russia, which destroyed long-range bombers and other aircraft. Meanwhile, US President Donald Trump doubled down on tariffs over steel and aluminum imports to 50%, effective June 4, and rhetoric against China sent US global equities lower.

CNBC reported that Trump and China’s President Xi Jinping could speak this week, but not on Monday.

On the data front, the ISM Manufacturing PMI for May revealed that business activity deteriorated. Nevertheless, there were some improvements in the prices paid sub-component, which fell. Meanwhile, the employment index sub-component improved compared to the previous number, and it was received positively by market participants, who are eyeing Friday’s Nonfarm Payrolls figures.

Bullion prices are also up following Federal Reserve (Fed) Governor Christopher Waller's slightly dovish approach, saying that rate cuts remain possible later this year. However, he warned that policymakers are mainly focused on controlling inflation.

Gold daily market movers: Bullion rallies sharply as Greenback plummets

• Gold price surges as the US Dollar tanks. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six currencies, tumbles 0.72% at 98.71.
• US Treasury bond yields are rising, with the US 10-year Treasury note yielding up almost six basis points to 4.458%. US real yields had followed suit and are also surging by six basis points to 2.118%.
• The ISM Manufacturing PMI rose by 48.5, down from April’s 48.7, hitting its lowest reading since November. The Prices Index remained in expansion territory, registering 69.4 percent, while the Employment Index stood in contractionary territory but improved from 46.5 to 46.8.
• The S&P Global Manufacturing PMI remained in expansionary territory, yet dipped in May from April’s 52.3 to 52.
• After the data release, the Atlanta Fed’s GDPNow preliminary reading of economic growth for Q2 2025 rose sharply from 3.8% to 4.6%.
• Money markets suggest that traders are pricing in 51 basis points of easing toward the end of the year, according to Prime Market Terminal data.

FXStreet