Gold prices increased for the third day in a row, reaching a one-week high on Wednesday. This rise was influenced by a weaker U.S. dollar and heightened concerns over the Russia-Ukraine conflict, which boosted demand for safe-haven assets like gold.
By 0323 GMT, spot gold was up 0.32% at $2,640.19 per ounce, marking its highest level since November 11. Meanwhile, U.S. gold futures climbed 0.5% to $2,643.70.
Key Factors Driving Gold Prices
The U.S. dollar, which recently hit a one-year high, has paused its rally. This makes gold more attractive to investors holding other currencies.
Tensions between Russia and Ukraine also fueled gold’s rise. Russian President Vladimir Putin announced a lower threshold for nuclear strikes in response to conventional attacks, following reports that the U.S. authorized Ukraine to use American-made weapons for deep strikes into Russian territory.
Ilya Spivak, head of global macro at Tastylive, explained, “The U.S. authorization and Russia’s response could lead to the use of tactical nuclear weapons, which is adding to market uncertainty and boosting safe-haven assets like gold. The next resistance level to watch is around $2,700.”
Federal Reserve Signals on Interest Rates
Investors are also closely monitoring comments from Federal Reserve officials regarding the potential path of U.S. interest rates. This week, the Fed is expected to provide insights into possible rate cuts.
Market predictions show a 58.9% likelihood of a 25-basis-point rate cut in December. However, recent strong economic data and proposed tariffs by U.S. President-elect Donald Trump suggest rates might remain high for longer.
Spivak noted, “The market is recalibrating its expectations for the Fed’s rate cuts next year. Rising inflation concerns could be a headwind for gold, as higher rates reduce the appeal of non-yielding assets like gold.”
Kansas City Fed President Jeffrey Schmid added that while the Fed’s initial rate cuts show confidence in controlling inflation, uncertainty remains about how far rates can drop. The Fed is focused on bringing inflation back to its 2% target.
Other Precious Metals
- Spot silver held steady at $31.22 per ounce.
- Platinum edged up 0.1% to $975.10.
- Palladium remained flat at $1,035.43.
