(Bloomberg) -- Gold pared losses as traders assessed the Federal Reserve’s interest-rate path after US data showed signs of downside risks under President Donald Trump’s trade agenda.
The US economy contracted at the start of the year for the first time since 2022 on a monumental pre-tariffs import surge and more moderate consumer spending. Separate data showed US consumer spending jumped in March, while a key measure of inflation was flat.
Traders now bet that the Fed will deliver four quarter-point rate cuts this year to help prevent a recession. Lower rates are typically positive for bullion as it pays no interest.
Trump blamed former President Joe Biden for weak economic data that sent stocks tumbling, arguing government data showing increased domestic investment signaled his tariff regime is working.
Uncertainty surrounding Trump’s disruptive tariff policies has stoked haven demand for gold this year, while triggering a selloff in US assets including Treasuries.
“Gold is a global asset, which you could argue knows no borders. It’s not a sovereign asset - like Treasuries is strongly pegged to the US or bunds to Germany,” said Robin Marshall, director of global investment research at FTSE Russell. Bullion’s cross-border independence has helped attract investors, according to Marshall.
Gold has climbed more than 25% this year after surging to a record high above $3,500 an ounce last week. The ferocious run has also been supported by strong inflows into gold-backed exchange-traded funds, robust central-bank purchases and signs of speculative demand in China.
Investors will be on the lookout for a key US jobs report due Friday that may shed light on the initial effects from Trump’s trade policy.
Bloomberg Economics expects April’s jobs report to show a solid net gain in nonfarm payrolls. But the breadth of job creation is narrowing rapidly. April’s report will also have some bad omens for the May jobs print. The first wave of tariffs, implemented in February, has likely started causing a slowdown in transportation and logistics hiring, according to Anna Wong, chief US economist at Bloomberg Economics.
Spot gold dipped 0.4% to $3,305.16 an ounce as of 2:03 p.m. in New York, after earlier dropping as much as 1.5%. The Bloomberg Dollar Spot Index was steady. Silver and platinum fell while palladium was little changed.
--With assistance from Jack Ryan and Sybilla Gross.
