Gold edges towards monthly gain on US rate cut expectations

Markets were also keeping a close eye on international trade tensions, with U.S. President Donald Trump’s shock move to slap tariffs on Mexico risking tipping the United States, and maybe the whole world, into recession.

Spot gold was up 0.3% at $1,292.68 per ounce at 0141 GMT. It has risen about 0.7% so far this month.

The metal is also on track for a second consecutive weekly gain, up about 0.5% over the week.

U.S. gold futures rose 0.4% to $1,297 an ounce.

U.S. inflation was much weaker than initially thought in the first quarter amid a sharp slowdown in domestic demand, which could cast doubts on the Federal Reserve’s view that the benign price pressures were largely because of temporary factors.

Asian shares sank and sovereign bonds surged on Friday after Trump’s Thursday comments that the United States will impose a 5% tariff on all goods coming from Mexico starting on June 10 until illegal immigration across the southern border is stopped.

Also adding to economic woes, China’s factory activity shrank more than expected in May, an official survey showed on Friday, heaping pressure on Beijing to roll out more stimulus to support an economy hit by a bruising trade war with the United States.

Gold is widely viewed as a safe-haven asset, meaning its appeal typically grows amid political and economic tensions.

The U.S. dollar was heading for a 0.5% gain this week, supported by weakness in peers such as the euro and sterling.