Gold Soars 1%, On Track for Its Best Week in Over a Year

Gold prices increased by 1% and are on track for their strongest week in a year as of Friday, buoyed by demand for safe assets due to escalating tensions in the Russia-Ukraine conflict, along with speculation regarding potential reductions in U.S. interest rates.

As of 0800 GMT, the price for spot gold XAU= climbed 1% to $2,696.76 per ounce. For the week, bullion has risen over 5%, marking its largest weekly gain since early October 2023.

U.S. gold futures GCv1 saw a rise of 0.9%, reaching $2,699.30.

The surge in gold prices is primarily driven by geopolitical strife, such as recent Ukrainian strikes on Russian facilities, and cautious statements from officials at the Federal Reserve, noted Soni Kumari, a commodity strategist at ANZ.

According to Ukraine’s military, its drones successfully targeted four oil refineries, radar stations, and various military sites in Russia during an early Friday offensive.

The desirability of gold is enhanced by such geopolitical unrest, economic uncertainties, and the prevailing low interest rate scenario.

On Thursday, the President of the Chicago Federal Reserve reaffirmed his support for additional cuts to U.S. interest rates and expressed willingness to consider reducing the pace of such cuts.

The markets currently estimate a 59.4% probability of a 25-basis-point reduction at the Fed’s December session, according to the CME Fedwatch tool.

“Should the Fed decide to skip or delay the rate cut in December, it would negatively impact gold prices, possibly leading to a downturn,” added Soni Kumari.

Investors are poised to focus on the upcoming final U.S. consumer sentiment data, scheduled for release at 0300 GMT, and comments from Fed Governor Michelle Bowman, to gain further insights into the potential for rate cuts.

Nicholas Frappell, global head of institutional markets at ABC Refinery, suggests that gold’s immediate trajectory could be shaped by forthcoming major U.S. economic data releases, such as preliminary GDP and core PCE indicators. He anticipates gold prices might aim for the $2,690-$2,715 range, based on recent patterns.

On the same note, spot silver XAG= increased by 1.7% to $31.31 per ounce, platinum XPT= rose by 0.9% to $969.35, and palladium XPD= experienced a 1.3% increase to $1,042.50. All three metals are poised for a weekly gain.