Gold prices rose for the third consecutive session to a one-week high on Wednesday, driven by a softer dollar and escalating tensions between Russia and Ukraine that raised the demand for safe-haven assets.
In the UAE, gold rates recorded a slight surge, with 24-carat gold gaining AED0.75 to AED319.25 and 22-carat gold rising AED0.5 to AED295.50. Meanwhile, 21-carat gold rose AED0.75 to AED286.25 and 18-carat gold gained AED0.5 to AED245.25.
Globally, spot gold rose 0.10 percent to $2,629.82 per ounce, as of 6:40 GMT, its highest since November 11, after falling to its worst week in more than three years last week. Gold prices gained close to 32 percent in the last year, reaching an all-time high of $2,790.15 in late October.
Meanwhile, U.S. gold futures gained 0.13 percent to $2,634.45.
Russia-Ukraine tensions raise safe-haven demand
The U.S. dollar’s rally halted after significant gains following the U.S. election, making bullion more attractive to buyers holding other currencies.
In addition, the risk of a further escalation of geopolitical tensions amid rising tensions between Russia and Ukraine continues to offer some support to gold prices. However, easing worries about a full-blown nuclear war, along with the emergence of some U.S. dollar dip-buying, caps gains for the commodity.
Russian President Vladimir Putin lowered the threshold for a nuclear strike in response to a broader range of conventional attacks, days after reports said Washington had allowed Ukraine to use U.S.-made weapons to strike deep into Russia.
On Sunday, Russia launched its largest air strike on Ukraine in almost three months, severely damaging the country’s power system. This led U.S. President Joe Biden to authorize for Ukraine the use of long-range American missiles against military targets inside Russia, which prompted some haven flows and benefited gold prices on Monday.
December rate cut bets dip
Several Federal Reserve officials this week are expected to provide additional insight into the U.S. rate cut trajectory. Currently, traders see a 59.1 percent chance of a 25-basis-point cut in December and a 40.9 percent chance of the Fed keeping rates steady, according to the CME Fedwatch tool.
Recent strong data and U.S. president-elect Donald Trump’s proposed tariffs have pointed to rates remaining higher for longer. Trump’s incoming administration is expected to focus on lowering taxes and raising tariffs, which could fuel inflation and limit the Fed’s ability to ease monetary policy. Several Fed officials, including chair Jerome Powell, recently suggested caution in cutting rates, which further supported the surge in the dollar and impacted gold prices.
The market is adjusting its expectations for the Fed’s cuts next year as inflation is becoming a bigger concern, which could be negative for gold prices. Higher rates reduce the appeal of non-yielding assets like gold. Kansas City Fed president Jeffrey Schmid said that it remains uncertain how far rates can fall. However, the initial reductions are a vote of confidence that inflation is returning to its 2 percent target.
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Other precious metals
As gold prices rose further, the precious metals market saw mixed movement. Spot silver fell 0.69 percent to $31 while platinum declined 0.36 percent to $970.55 and palladium fell 0.39 percent to $1,031.00. However, copper rose 0.62 percent to $4.16.
