*

Trump calls China's Xi tough, 'hard to make a deal with'

*

US private payrolls post smallest gain in over two years

in May

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US service sector unexpectedly contracts in May

*

Dollar down 0.5%

(Updates to add comments, ISM data)

By Sherin Elizabeth Varghese

June 4 (Reuters) - Gold rose 1% on Wednesday, supported

by a softer dollar and weak U.S. data, as investors grappled

with mounting economic and political uncertainty.

Spot gold climbed 0.6% to $3,373.06 an ounce, by

12:23 p.m. ET (1623 GMT), after climbing as much as 1% earlier.

U.S. gold futures gained 0.6% to $3,398.00.

The U.S. dollar index fell 0.5%, making gold cheaper

for buyers holding other currencies, while benchmark U.S.

10-year Treasury yields edged lower.

"The U.S. services sector - two-thirds of the economy -

contracting for the first time in a year has goosed gold a

percent higher after bullion had shrugged off a weak though

historically volatile ADP employment report," said Tai Wong, an

independent metals trader.

"A close back above $3,400 will prime a run for new all-time

highs."

The Institute for Supply Management said its

non-manufacturing purchasing managers index dropped to 49.9 last

month, the lowest reading since June 2024. While, ADP data

showed U.S. private employers added the fewest workers in over

two years.

"There is considerable geopolitical uncertainty with

Russia-Ukraine, Iran, Syria and China, driving people to buy

gold... and although traders may not expect gold to rise as

quickly, there is still plenty of upside," said Daniel

Pavilonis, senior market strategist at RJO Futures.

U.S. President Donald Trump said his Chinese counterpart Xi

Jinping is tough and "extremely hard to make a deal with," just

days after accusing China of violating an agreement to roll back

tariffs.

In addition, Washington doubled tariffs on steel and

aluminum imports and urged trading partners to submit their

"best offers" to avoid more import levies.

All eyes are on Friday's U.S. payrolls report for clues on

the Federal Reserve's next move.

Gold, a safe-haven asset during times of political and

economic uncertainty, tends to thrive in a low-interest-rate

environment.

Spot silver was down 0.3% at $34.40, platinum

rose 1.4% to $1,088.39, while palladium lost 1.4%

to $995.87.