Gold rose 1% on Wednesday, supported by a weaker dollar and weak U.S. data, as investors grappled with rising economic and political uncertainty.

Spot gold rose 0.8% to $3,378.22 an ounce by 2:02 p.m. ET (1802 GMT), after rising as much as 1% earlier. U.S. gold futures settled 0.7% higher at $3,399.20.

The U.S. dollar index (.DXY), opened in a new tab, fell 0.5%, making bullion cheaper for buyers holding other currencies, while the benchmark 10-year U.S. Treasury yield edged lower.

"The US services sector - two-thirds of the economy - contracting for the first time in a year has pushed gold up 1 per cent after bullion shrugged off a weak ADP jobs report despite historically volatile data," said Tai Wong, an independent metals trader.

"A close back above $3,400 would trigger a rally to a new all-time high."

The Institute for Supply Management said its non-manufacturing purchasing managers' index fell to 49.9 last month, the lowest reading since June 2024, while ADP data showed US private employers added the fewest jobs in more than two years.

"There's a fair amount of geopolitical uncertainty with Russia-Ukraine, Iran, Syria and China that's driving people to buy gold... and while traders probably didn't expect gold to rise that fast, there's still a lot of upside," said Daniel Pavilonis, senior market strategist at RJO Futures.

US President Donald Trump said his Chinese counterpart Xi Jinping was tough and "very difficult to deal with", just days after accusing Beijing of breaking a deal to lift tariffs.

In addition, Washington doubled tariffs on steel and aluminum imports and urged trading partners to submit their "best offers" to avoid more levies.

All eyes are on Friday's U.S. payrolls report for clues on the Federal Reserve's next move.

Gold, a safe haven during times of political and economic uncertainty, tends to thrive in a low-interest environment.

Spot silver fell 0.1% to $34.45, platinum rose 1.5% to $1,089.99, while palladium fell 1% to $1,000.55. (alg)

Source: Reuters