Gold Prices Rebound as Russia-Ukraine Tensions Boost Safe-Haven Demand
Gold prices surged on Monday, climbing 1.9% to close at $2,611.73 per ounce after six consecutive days of losses. The increase came as the U.S. dollar paused its rally, and renewed uncertainty from the escalating Russia-Ukraine conflict rekindled demand for safe-haven assets.
FXStreet analyst Christian Borjon Valencia noted that gold rebounded from a two-month low of $2,536 per ounce, surpassing $2,600 early in the week. Increased geopolitical tensions, fueled by the U.S. decision to allow Ukraine to use American weapons for long-range strikes inside Russia, contributed to the surge in gold prices.
RJO Futures strategist Daniel Pavilonis echoed these sentiments, attributing the safe-haven demand partly to U.S. President Joe Biden's announcement to provide Ukraine with long-range missiles. "This has triggered some safe-haven demand for gold," he said.
Kinesis Money analysts have set the next target for gold bulls at $2,650 per ounce, emphasizing that geopolitical risks are likely to continue supporting prices. Meanwhile, the U.S. dollar index (DXY) fell 0.38% to 106.27, making gold more affordable for holders of other currencies.
Pavilonis added that whether the Federal Reserve opts for further rate cuts could impact gold’s trajectory, predicting a potential climb to $2,700 per ounce. Fed officials are expected to speak this week, with the market anticipating a third rate cut in December. Interest rate reductions generally make non-yielding assets like gold more attractive.
On the technical front, Valencia suggested that further gains could push gold to $2,710 per ounce if resistance at $2,700 is cleared. However, a drop below the November 14 low of $2,536 per ounce could see the price fall towards the next support level at $2,500.
