Gold prices advanced for the third consecutive day on Wednesday, extending weekly highs as mounting geopolitical risks bolstered safe-haven demand for the precious metal.
The subdued performance of the U.S. dollar further supported gold, though rebounding U.S. Treasury bond yields provided a counterweight.
Market sentiment was lifted slightly by comments from Russian and U.S. officials suggesting a reduced likelihood of nuclear conflict, which contributed to a mixed tone in equity markets.
Russia-Ukraine tensions have remained a primary driver of gold’s upward movement. On Tuesday, Russian President Vladimir Putin approved an updated nuclear doctrine, lowering thresholds for nuclear weapon use. In a significant escalation, Ukraine utilised U.S.-supplied ATACMS missiles to strike targets within Russia’s Bryansk region.
Meanwhile, Russian Foreign Minister Sergei Lavrov stated efforts are underway to avoid a nuclear war, while the White House reaffirmed that the U.S. has no plans to alter its nuclear posture.
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While geopolitical risks have boosted gold, economic factors may limit further advances. The U.S. Treasury bond yields resumed their upward trend following Tuesday’s decline, lending strength to the U.S. dollar.
Additionally, Kansas Fed President Jeffrey Schmid indicated that the Federal Reserve would act to prevent inflationary pressures stemming from fiscal deficits, potentially leading to higher interest rates.
Market participants are also eyeing speeches from influential Federal Open Market Committee (FOMC) members for clarity on the Federal Reserve’s policy direction.
According to the CME Group's FedWatch Tool, there is currently a 59.1% chance of a 25-basis-point rate cut in December, reflecting investor uncertainty.