Gold prices saw an increase in Asian trade on Thursday, boosted by heightened tensions between Russia and Ukraine which fueled safe haven demand. Despite the strength of the dollar, gold managed to rise for a fourth consecutive session, showing resilience after hitting over two-month lows. However, the pace of its gains seemed to be slowing down as traders reevaluated their expectations for lower U.S. interest rates.
Gold futures rose by 0.2% to $2,656.84 an ounce, while December futures increased by 0.3% to $2,659.15 an ounce by 00:00 ET (05:00 GMT).
Russia-Ukraine tensions support gold demand
The ongoing tensions between Russia and Ukraine have led to higher demand for safe haven assets, with the U.S. authorizing the use of long-range missiles by Kyiv. Russia responded by lowering its threshold for nuclear retaliation, sparking fears of a potential escalation in the conflict. This backdrop has prompted traders to turn to gold, helping the precious metal recover from recent lows.
Dollar, yield strength limits gold recovery
Gold had been facing losses in recent weeks as risk appetite initially increased following Donald Trump’s victory in the 2024 presidential election. The anticipation of higher U.S. interest rates in the long term, supported by the dollar and Treasury yields, has put pressure on gold prices. Uncertainty surrounding U.S. interest rates was further fueled by inflation data and the Federal Reserve’s recent communications, leading traders to reassess their expectations for a rate cut in December.
Other precious metals also saw gains on Thursday, but have been struggling in the past two weeks. Silver rose by 0.4% to $970.35 an ounce, while platinum increased by 0.7% to $31.225 an ounce. In the industrial metals sector, copper prices rose slightly, but concerns over slowing Chinese demand have weighed on the market.
Analysis:
The tensions between Russia and Ukraine have contributed to a rise in gold prices, as investors seek safe haven assets amidst geopolitical uncertainties. However, the strength of the dollar and expectations for higher U.S. interest rates have limited the extent of gold’s recovery. Traders should continue to monitor developments in the Russia-Ukraine conflict and U.S. monetary policy decisions to gauge the impact on their investments in precious metals.