Jamie Spencer
Gold prices surged this week, poised for their best weekly performance since October 2023, as escalating tensions in the Russia-Ukraine conflict and hints of Federal Reserve policy easing fueled the precious metal’s haven appeal.
Geopolitical Tensions Drive Demand for Gold
Bullion rose 1.4% on Friday to $2,706.73 an ounce following alarming developments in the Russia-Ukraine war. Ukraine reported a “new” type of ballistic missile strike on Dnipro, signaling heightened aggression from Moscow. This escalation has prompted global investors to flock to safe-haven assets like gold.
“The tit-for-tat escalation between Russia and Ukraine has lifted the geopolitical temperature to higher levels,” said Ole Hansen, head of commodities strategy at Saxo Bank. He noted that renewed haven demand has provided a significant boost to gold prices, reversing the early November correction.
Federal Reserve Easing Adds to Bullion’s Momentum
Traders are also eyeing signals from the Federal Reserve that suggest interest rates may decline. Chicago Fed President Austan Goolsbee indicated that rates could move “a fair bit lower” as inflation trends closer to the Fed’s target. Lower interest rates typically favor gold, which does not pay interest but gains appeal as the cost of holding it decreases.
The Fed’s monetary easing cycle has been a significant driver of gold’s nearly 30% rally this year, alongside robust central bank buying and increasing geopolitical uncertainty.
Gold’s Record-Breaking Potential
Market analysts are optimistic about gold’s long-term trajectory. Major financial institutions, including Goldman Sachs and UBS, have issued bullish forecasts for gold, predicting record highs in 2025.
Spot gold has gained 5.4% this week, marking its strongest performance in over a year. Other precious metals also saw movement, with silver climbing 1.4% to $31.23 an ounce, while palladium and platinum experienced slight declines.
Dollar Strength Weighs on Commodities
Despite gold’s surge, the Bloomberg Dollar Spot Index rose 0.4% this week, continuing a two-day rally. Historically, a strong dollar tends to dampen commodity prices, as it makes them more expensive for holders of other currencies. However, gold has managed to defy this trend in recent sessions, driven by strong haven demand and supportive monetary policy signals.
Closing Thoughts
Gold’s stellar weekly performance reflects a convergence of factors: rising geopolitical tensions, expectations of Federal Reserve easing, and sustained central bank buying. As 2025 approaches, the precious metal is poised to test new records, cementing its status as a key safe-haven asset in uncertain times.
