On Thursday (November 21), during the Asian market session, spot gold remained in a narrow range and is currently trading around $2649.57 per ounce. In Wednesday's trading, gold prices rose for the third consecutive day, once reaching a more than one-week high of $2655.27 per ounce, and finally settled at $2650.07 per ounce. This was mainly due to the escalation of the Russia-Ukraine situation intensifying geopolitical concerns, driving investors towards safe-haven assets.
Earlier, due to technical pressure from the 55-day moving average and a cooling of market expectations for a Fed rate cut in December, the dollar index rebounded, and gold prices once fell back to $2618.78 per ounce. However, the fermentation of geopolitical risks helped gold reverse its decline and resume its rise.
Fed Policy and Market Expectations
Despite recent consolidation in market expectations for a Fed rate cut, fluctuations remain. Most economists expect the Fed to announce a rate cut at the December meeting. However, recent Fed officials' remarks have shown caution towards the future path of rate cuts. Fed officials Bowman and Cook expressed divergent views on inflation and monetary policy on Wednesday. On one hand, Bowman mentioned ongoing concerns about inflation, while on the other, Cook believes that price pressures will continue to ease.
The adjustment in the rate cut path is closely related to the U.S. political dynamics. Analysts believe that Trump's policies might introduce new inflation risks, further complicating the Fed's decision-making environment. Meanwhile, the dollar index has risen about 3% since the U.S. election, as markets expect the Fed may slow down the pace of rate cuts.
Geopolitical Factors Boosting Safe-Haven Demand
The tension in the Russia-Ukraine situation is a significant driver of gold's rise. Russian President Putin further lowered the threshold for using nuclear strikes, causing international concern. Simultaneously, on Wednesday, Ukraine fired 12 British "Storm Shadow" cruise missiles at Russia, the latest Western weapon Ukraine has been permitted to use since deploying U.S. ATACMS missiles on Tuesday. These developments sharply increased market risk aversion, pushing gold prices to rise against the trend.
The dollar also benefited from rising geopolitical risks on Wednesday, rising by 0.44% to 106.64, but this did not diminish the allure of gold as a safe-haven asset. Analysts expect that under the dual influence of geopolitical situations and uncertainty in Fed policy, gold prices may continue to maintain a volatile trend.
