Gold prices held firm on Thursday (05/06), supported by easing geopolitical tensions, dovish central bank signals and continued weakness in US labor market data, factors that continued to boost demand for safe-haven assets.

After testing the key psychological level of $3,400 during the European session, prices eased slightly but remained elevated as markets digested positive developments. US President Donald Trump announced via Truth Social that he had a productive and positive 90-minute phone call with Chinese President Xi Jinping, where they discussed details of a recently concluded trade deal. The potential for a de-escalation of trade tensions helped stabilize sentiment across risk-sensitive markets.

The call between Presidents Xi and Trump came hours before German Chancellor Friedrich Merz's scheduled visit to the White House, where he is expected to press Trump to ease tariffs on European exports amid rising global trade tensions.

Meanwhile, the European Central Bank (ECB) delivered a long-expected 25 basis point interest rate cut, followed by a press conference in which President Christine Lagarde struck a cautious tone, warning that "while euro area banks remain resilient, broader financial stability risks remain elevated."

In the U.S., economic data continued to show signs of a cooling labor market, with Initial Jobless Claims rising to 247,000, above the 235,000 expected. Markets now await Friday's Nonfarm Payrolls (NFP) report, which is expected to show a slowdown in hiring to 130,000 jobs in May from 177,000 in April, with the unemployment rate expected to hold at 4.2%.

Weaker employment data could boost expectations for a Federal Reserve rate cut in July, although market participants continue to bet on a September cut, according to the FedWatch tool. For non-yielding assets like Gold, a lower interest rate environment reduces opportunity costs, providing a strong fundamental boost to prices.(alg)

Source: FXstreet