Gold prices were in the green on Friday as safe-haven inflows strengthened due to an escalation in tensions between Russia and Ukraine.
A weaker dollar also boosted sentiments in the gold market.
A weaker dollar makes commodities such as gold cheaper for overseas buyers, lifting demand.
Gold prices have broken back above the $2,660 per ounce level, which is expected to provide further upside momentum for the yellow metal.
Meanwhile, traders have also raised their bets for a December interest rate cut by the US Federal Reserve.
At the time of writing, the February gold contract on COMEX was at $2,683.81 per ounce, up 0.7% from the previous close.
Russia-Ukraine tensions
Gold prices fell sharply earlier this week to a near one-week low of $2,618.50 per ounce after a ceasefire deal between Israel and Lebanon-based Hezbollah was brokered by the US.
However, prices recovered as Russia targeted Ukraine’s energy infrastructure, and also threatened to hit Kyiv with advanced ballistic missiles.
“Concerns about the effect of US President-elect Donald Trump’s trade tariffs on global growth and the protracted Russia-Ukraine war continue to drive haven flows towards the precious metal,” Haresh Menghani, editor at Fxstreet, said in a report.
Moscow’s response came after Ukraine had last week targeted Russian borders with Western weapons.
The US and UK had allowed Ukraine to use their weapons to strike deep into Russian territory, which escalated tensions in the region.
Additionally, in the Middle East, doubts emerged about the ceasefire between Israel and Hezbollah as both parties blamed each other for violations on Thursday.
Investors bet on Fed rate cut
Despite positive economic data from the US earlier this week, traders expect the US Fed to cut rates once again in December.
According to the CME FedWatch tool, traders have priced in a 66.3% probability of the US central bank cutting rates by 25 basis points at next month’s meeting.
Source: CME Group
Earlier this week, bets were below the 60% mark.
However, expectations of further rate cuts may be reduced due to US President-elect Donald Trump’s expansionary policies.
“Meanwhile, expectations that US President-elect Donald Trump’s expansionary policies would revive inflationary pressures and signs that the progress in lowering US inflation stalled in October could restrict the Fed from easing policy further,” Menghani said.
He added:
This, in turn, could limit any further slide in the US bond yields and lend support to the USD, warranting caution before placing fresh bullish bets around the non-yielding gold price.
The long-term outlook for US interest rates remains uncertain, especially after this week when the personal consumption expenditure index (PCE) remained above the Fed’s preferred target of 2%.
Gold price: technical analysis
Gold prices have support at $2,650 per ounce, according to Fxstreet.
However, prices are currently around $2,688 per ounce, which means gold has broken above the $2,649-$2,650 level, and it could trigger fresh bullish movement.
Source: Fxstreet
“On the flip side, the $2,650 confluence resistance breakpoint now seems to protect the immediate downside, below which the gold price could slide back to the $2,633 area and the overnight swing low, around the $2,620 region,” Menghani said.
Among other precious metals, platinum prices were up 1.6% at $947 per ounce, while silver futures on the COMEX were more than 2% higher at $31.180 per ounce.
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