Gold (XAU/USD) is benefiting from renewed trade tensions on Monday, which have triggered demand for the safe-haven yellow metal.

As the August 1 tariff deadline looms, prospects of a deal between the European Union (EU) and the United States (US) are fading. As a result, XAU/USD has recovered with bulls approaching the $3,400 psychological barrier at the time of writing.

EU-US trade tensions rise, lifting demand for Gold

Ongoing talks between the EU and the US have failed to make any meaningful progress over recent weeks. US President Donald Trump has threatened to impose a 30% tariff on most goods imported from members of the EU bloc in an effort to reduce the current trade deficit.

In an interview with CBS News over the weekend, US Commerce Secretary Howard Lutnick signaled optimism about a potential deal. He stated that "These are the two biggest trading partners in the world, talking to each other. We'll get a deal done. I am confident we'll get a deal done."

However, he also warned that an extension would not be granted. "That's a hard deadline, so on August 1, the new tariff rates will come in," he said.

According to CNBC, the European Council reported that the total value of trade between the EU and US amounted to $1.96 trillion in 2024.

The chart below represents the value of trade between the US and its largest trading partners, as illustrated in an article in The Wall Street Journal.

Even with a deal, the US has signaled that the bloc would still be exposed to a baseline tariff of 15% to 20%. As the EU prepares for the worst-case scenario, it has threatened to retaliate against the US if a deal is not reached. A wide range of countries are finding themselves in a similar situation, which is causing a reduction in demandfor the US Dollar. A weaker USD also makes Gold less expensive for foreign investors seeking safety in alternative assets.

Source : Fxstreet