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Gold prices reach three-week high as Trump escalates the trade war

Gold prices reached a three-week-high on Monday. This was boosted by demand for safe havens after U.S. president Donald Trump threatened to impose 30% tariffs on imports from Europe and Mexico.

As of 0134 GMT spot gold was up by 0.2% to $3,361.19 an ounce after reaching its highest level since June 23 in the earlier session. U.S. Gold Futures rose 0.4% to $3376.

Kelvin Wong, OANDA's senior analyst for market analysis, said: "We see safe-haven demands coming back due to the uncertainty surrounding the implementation of U.S. Global Trade Tariffs Policy."

"Near-term gold outlook is positive. If gold prices can close daily above $3360, they could possibly advance towards the next resistance at $3435."

Trump threatened on Saturday to impose a 30 percent tariff on imports coming from Mexico and the European Union, starting August 1. This comes after weeks of failed negotiations with major U.S. trade partners.

The European Union (EU) and Mexico both described the tariffs as unfair and disruptive. However, the E.U. The European Union said that it would continue to suspend its countermeasures against U.S. tariffs through early August, and will continue to push for a negotiated solution.

Investors are now waiting for the U.S. Inflation data for June, due Tuesday, to get more clues about the Federal Reserve's rate path. The markets are pricing in just 50 basis points of Fed easing before December.

In an environment of low interest rates, gold, which is often viewed as a safe haven during times of economic uncertainty, does well.

SPDR Gold Trust is the largest gold-backed ETF in the world. Its holdings dropped 0.12% on Friday to 947.64 tons from 948.80 tonnes the previous session.

Gold speculators reduced their net long positions in gold by 1,855 contracts, to 134.842, during the week ending July 8.

Spot silver rose 0.6% per ounce to $38.59, platinum dropped 1.6% to 1,377.37, and palladium fell 2.1% to $1,000.

(source: Reuters)