Gold prices continued to rally for a fifth consecutive day on Friday, reaching two-week highs of US$2,691 during the Asian session.
By 3:45 pm AEDT (4:45 am GMT) spot gold was $19.2 or 0.7% to US$2,689.90 per ounce.
The ongoing war in Ukraine has driven investors to seek refuge in gold, which is traditionally viewed as a hedge against economic uncertainty and inflation.
Market sentiment has also been influenced by expectations surrounding U.S. President-elect Donald Trump’s anticipated economic policies, which some fear could reignite inflationary pressures.
Despite the U.S. dollar reaching its highest level since October 2023, gold prices have maintained their momentum.
A stronger dollar and elevated U.S. Treasury bond yields typically weigh on gold, however, markets are speculating that persistent inflation pressures may constrain the Federal Reserve’s ability to ease monetary policy in the short term.
Investors remain focused on the Federal Reserve's upcoming decisions, with traders pricing in a 59.4% likelihood of a 25-basis-point rate cut in December, according to the CME Group’s FedWatch Tool.
Fed policymakers, including Chair Jerome Powell, have recently cautioned about the risks of inflationary shocks, suggesting a measured approach to future rate cuts.
Chicago Fed President Austan Goolsbee noted that inflation is trending toward the central bank’s 2% target, while New York Fed President John Williams highlighted a balanced labor market that is not exerting additional inflationary pressure.
U.S. economic data released this painted a positive picture for the economy, as initial jobless claims fell to a seven-month low of 213,000, while existing home sales rebounded sharply in October, marking the first annual gain since mid-2021.
Investors now turn their attention to Friday’s flash purchasing managers’ index (PMI) reports, which are expected to provide further insight into the health of the global economy and influence the trajectory of gold prices.