Gold prices rose on Friday, as investors rushed to safe-haven assets due to the escalation of tensions between Russia & Ukraine.
The gold market also saw a boost from a weaker dollar.
The weaker dollar means that commodities like gold are cheaper for buyers overseas, which increases demand.
Gold prices have risen above $2,660 an ounce, and are expected to continue rising.
In the meantime, traders are also increasing their bets on a December rate cut from the US Federal Reserve.
The February gold contract at COMEX closed on the day of this article at $2,683.81 an ounce, an increase of 0.7% over the previous close.
Tensions between Russia and Ukraine
The US brokered a ceasefire agreement between Israel and Hezbollah, a group based in Lebanon. This led to the sharp drop of gold prices earlier this week. They fell to a low of about $2,618.50 an ounce.
Prices recovered when Russia threatened to strike Kyiv using advanced ballistic missiles and targeted Ukraine’s infrastructure.
Haresh Menghani is the editor of Fxstreet. He said that the prolonged Russia-Ukraine conflict and concerns about the impact of Donald Trump’s tariffs on the global economy continue to drive flows into the precious metal.
The response of Moscow came after Ukraine last week attacked Russian borders using Western weapons.
The US and UK allowed Ukraine to use its weapons to strike deep inside Russian territory. This escalated tensions within the region.
In the Middle East as well, there are doubts about the ceasefire agreement between Israel and Hezbollah after both sides blamed one another for violating it on Thursday.
Investors Bet on Fed Rate Cut
Despite the positive economic data released by the US this week, traders are expecting the US Fed will cut rates again in December.
CME FedWatch shows that traders have priced a 66.3% chance of the US central banks cutting rates by 25 basis point at the next meeting.
In the first part of this week, betting was below 60%.
The expansionist policies of Donald Trump, the US president-elect, may reduce expectations for further rate reductions.
Menghani stated that “meanwhile, expectations that US president-elect Donald Trump’s expansionary policy would revive inflationary forces and signs that progress in lowering US inflation stalled in Octember could limit the Fed’s ability to ease policy further.”
He added:
It is important to be cautious before making new bullish bets on the gold price.
Even though the Fed has set a preferred rate of 2%, the long-term outlook remains uncertain. This is especially true after this past week when the PCE index remained higher than the Fed’s target.
Gold price: Technical analysis
According to Fxstreet, gold prices are supported at $2,650 an ounce.
Gold prices have risen above the $2.649-$2.650 mark, and could be a catalyst for new bullish movements.
Menghani stated that the “confluence resistance breakpoint” of $2,650 now appears to protect the immediate downward slide, below which gold could fall back to the area of $2,633 and the overnight swing-low, around $2,620, Menghani said.
Silver futures at the COMEX rose more than 2% to $31.180 an ounce. Platinum prices also increased by 1.6%.
As new information becomes available, this post Safe-haven flows push gold prices up amid rising Russia-Ukraine conflict may be updated.
