Gold prices rose on Thursday as increasing tensions between Russia and Ukraine boosted safe-haven demand, helping bullion withstand the strength of the dollar.
Gold rose for the fourth session in a row, continuing its recovery from its lowest levels in more than two months. But the pace of gains for the yellow metal now appears slow amid pressure from the dollar, as traders questioned expectations of a decline in US interest rates.
Spot gold rose 0.2% to $2,656.84 an ounce, while gold futures expiring in December rose 0.3% to $2,659.15 an ounce.
The yellow metal drew support from rising safe-haven demand in the face of rising tensions between Russia and Ukraine, after the United States allowed Kiev to use long-range missiles.
Russia responded by lowering the threshold for nuclear retaliation, and warned of a dangerous escalation in the conflict over the US move. Ukraine launched a series of missile strikes against Russian territory this week, using Western-made weapons.
Fears of an escalation in the conflict pushed traders towards gold, helping the yellow metal recover after it fell from record highs over the past two weeks.
Gold has been suffering sharp losses in the past two weeks as risk appetite was initially strengthened by Donald Trump’s victory in the 2024 presidential elections.
Trump’s win also saw traders price in the prospect of higher long-term US interest rates, which supported the dollar and Treasury yields. The US dollar traded at just below a one-year high on Thursday.
Uncertainty over US interest rates was exacerbated by flat inflation data released last week, while the Federal Reserve adopted a less pessimistic tone in its recent speeches.
The CME Fedwatch Index showed that traders expect 57.3% odds of a 25 basis point cut in interest rates in December, compared to 85.7% odds last week. Bets on maintaining interest rates rose to 42.7% from 14.3% a week ago.
This idea put pressure on gold, since higher interest rates increase the opportunity cost of investing in the yellow metal.
