Gold prices saw a significant increase in Asian trade on Tuesday, bouncing back from a two-month low. This rise was fueled by the dollar pulling back from recent highs, along with growing tensions between Russia and Ukraine, which boosted safe haven demand.
The price of gold surged 0.4% to $2,622.59 an ounce, while December futures rose 0.5% to $2,626.90 an ounce by 23:20 ET (04:20 GMT). Spot prices had a nearly 2% increase on Monday.
Gold benefits from safe haven demand on Russia-Ukraine tensions
Reports surfaced over the weekend indicating that the U.S. had given Ukraine permission to use long-range missiles to target deeper into Russian territory. In response, Russia issued warnings of severe consequences if such attacks were carried out, while also launching missile strikes on various Ukrainian regions.
This potential escalation in conflict led to an increase in safe haven demand for gold.
Dollar, yields drop amid December rate cut speculation
Gold and other metals also found support from a weakening dollar and Treasury yields, as investors speculated that U.S. interest rates would be cut in December. The dollar fell from a one-year high in the past two sessions, while Treasury yields dropped after reaching a five-month peak.
The dollar’s weakness came despite strong inflation data and less dovish signals from the Federal Reserve, as the market still anticipates a rate cut in December. Traders are currently pricing in a 55.7% chance of a 25 basis point cut next month.
Other precious metals also saw gains on Tuesday, with silver rising 0.3% to $976.75 an ounce, and platinum increasing by 0.6% to $31.422 an ounce. Copper prices, part of the industrial metals, received some relief from the dollar’s weakness.
However, copper has faced significant losses over the past month due to concerns about slowing demand in China, its top importer. Benchmark copper on the London Metal Exchange rose 0.3% to $9,124.50 a ton, while December futures increased by 0.5% to $4.1440 a pound.
The People’s Bank of China is expected to announce its benchmark rate decision on Wednesday.
Overall, the rise in gold prices can be attributed to a combination of factors, including the retreat of the dollar, speculation of a December rate cut, and escalating tensions between Russia and Ukraine. Investors are turning to safe haven assets like gold amid the uncertain geopolitical landscape and economic indicators.