Gold prices rose by more than 1% on Friday, supported by a decline in the U.S. dollar, as markets anticipate an important meeting between the United States and China to discuss trade tensions between the two countries.
Gold rose in spot transactions by 1.1% to reach $3,340.29 an ounce by 17:46 GMT, recording weekly gains of about 3.1%. U.S. futures contracts for gold also rose by 1.1% to close at $3,344.
Gold is known as a safe haven during times of geopolitical and economic tensions, and it has recorded an increase of more than 27% since the beginning of the year.
This rise came after U.S. President Donald Trump indicated that imposing an 80% tariff on Chinese imports is 'appropriate', just before the anticipated talks between Washington and Beijing over the weekend.
At the same time, the U.S. dollar index fell by 0.3%, making dollar-priced gold less expensive for holders of other currencies.
On the geopolitical front, tensions escalated between India and Pakistan, as the two countries exchanged accusations of launching new military attacks using drones and artillery, marking the third day of the most intense fighting in nearly three decades between the nuclear neighbors.
David Meger, director of metals trading at High Ridge Futures, said: 'It is clear that the ongoing uncertainty regarding tariffs is the main factor supporting gold; however, we are not as optimistic at this time as we were in the past few months, and we may see a period of consolidation or a temporary retreat in prices.'
In the physical market, India – the second largest consumer of gold in the world – experienced a decline in demand this week, prompting traders to offer discounts on prices, especially as local prices soared to record levels due to the depreciation of the rupee. In contrast, buying interest increased in China after the end of the public holidays.
In his statements, Michael Barr, governor of the U.S. Federal Reserve, warned that President Trump's current trade policies could contribute to rising inflation rates, slowing growth, and increasing unemployment later this year, which could put policymakers in front of tough economic decisions.
In the rest of the precious metals, silver rose by 0.8% to $32.75 an ounce, platinum increased by nearly 2% to $995.10, while palladium rose by 0.2% to $977.68.