Gold prices saw an uptick on Wednesday as safe haven demand increased amidst heightened tensions between Russia and Ukraine. However, the gains were capped by the resilience of the dollar.
Gold futures rose 0.7% to $2,650.19 an ounce, while spot gold climbed 0.9% to $2,653.65 an ounce by 4:46 p.m. ET (21:46 GMT).
Russia-Ukraine Conflict Intensifies
The escalation in tensions between Russia and Ukraine was a major factor driving the demand for gold, as Moscow lowered the threshold for nuclear retaliation in response to reported U.S. authorization of long-range missiles by Ukraine against Russia.
Despite Russian Foreign Minister Sergei Lavrov’s assurance of avoiding nuclear war, hostilities between the two countries continued with ongoing attacks.
Dollar Strength Restricts Gold Recovery
The strength of the dollar limited gold’s recovery this week, especially as the greenback stabilized after recent losses. Uncertainty around the impact of a Donald Trump presidency on the U.S. economy and interest rates also influenced market sentiment.
Traders were assessing a 61% chance of a 25 basis point rate cut by the Federal Reserve, with doubts lingering on the possibility of a rate cut in December.
Gold had initially dropped from record highs after Trump’s election victory, but the market sentiment appeared to be stabilizing.
Other precious metals like silver and platinum also saw a decline on Wednesday, while industrial metals like copper faced losses due to underwhelming stimulus measures from China.
Overall, gold prices were supported by geopolitical tensions, but the gains were restricted by the strength of the dollar and uncertainties surrounding the U.S. economy and interest rates.
Analysis: Geopolitical events like the Russia-Ukraine conflict can impact the financial markets, leading to fluctuations in commodity prices like gold. Investors should monitor such developments and consider diversifying their portfolios to mitigate risks associated with market volatility.