Mubasher: Gold prices jumped to more than three-month high, after remarks from the Federal Reserve officials raised the prospects for interest rate cuts, sending the US dollar to a multi-week trough, Reuters reported.

By 11:43 am GMT, spot gold surged by 1.05% to $1,339.50 per ounce, well above $1,335.41 per ounce, its highest level since 21 February, while US gold futures jumped by 1.08% to $1,343 per ounce.

Fed Chair Jerome Powell said on Tuesday that the US central bank would respond “as appropriate” to the risks of trade conflict, opening the door for a possible rate cut.

After US President Donald Trump threatened to levy tariffs on Mexican imports, trade woes do not seem coming to an end, according to DailyFx analyst David Song.

“Markets are starting to come to grip with how these [trade feuds] are going to slow down the global economy and not just the US economy,” Song was quoted by Reuters.

In the same vein, St Louis Fed President James Bullard earlier in the week stated interest rate cuts “may be warranted soon.”

On the economic data front, figures released shortly after Powell’s remarks on Tuesday even underpinned the possibility of a rate cut, as new orders for US-manufactured goods dropped in April, with a two-year low level of shipments.

Interest rate cuts would catalyse a rally for the precious metal, as the lower costs of borrowing become, the more reduced the opportunity cost of holding the non-yielding bullion.

In addition, the greenback gauge hit an almost seven-week low on possibility of a rate cut.

At 11:51 am GMT, the dollar index, which traces the US currency against six major peers, ticked down by 0.02% to 97.05.

Since President Trump’s tariff threat, gold won more than $50, as investors sold riskier assets and sought safe-haven bullion.

“The focus will be on whether we will see global community of central bankers step in again and keep up the equity rally going [...] but until then this flight to safety will continue,” Song noted.