Gold prices experienced a slight decline after reaching their highest level in a week and a half during morning trading on Wednesday, currently trading around $2631 to $2636.
Despite this drop, gold continues to maintain its appeal as a haven, holding a steady upward trend for the third consecutive day. In my opinion, geopolitical tensions between Russia and Ukraine remain a decisive factor in supporting gold prices, reflecting ongoing concerns about escalation.
However, the market is currently in a state of hesitation and anticipation, as various changes may affect gold’s direction in the coming weeks, making its technical and economic analysis more complex.
From my perspective, gold is directly impacted by the escalating conflict between Russia and Ukraine, with noticeable recent intensifications in rhetoric and military tactics.
On one side, Russian President Vladimir Putin has approved new military measures under specific circumstances. On the other hand, Ukraine has targeted Russian military sites, heightening global fears of military escalation. While Russia claims it seeks to avoid nuclear war, gold markets are significantly affected by these fears, with investors flocking to gold as a hedge against uncertainty.
On the other hand, markets are starting to view domestic economic factors in the U.S. as potential limits to gold’s gains. There is a growing belief that the policies of elected President Donald Trump could stimulate U.S. economic growth, which might also drive inflation. In my opinion, these expectations point to the possibility that the Federal Reserve might scale back its interest rate cut plan, which directly impacts gold’s appeal as a non-yielding asset. As these expectations rise, U.S. bond markets are becoming more attractive to investors, helping to push up U.S. Treasury yields and increasing demand for the U.S. dollar.
Additionally, gold is facing pressure from rising U.S. bond yields, which in turn push the dollar higher. Although the yellow metal has continued to post gains for the third consecutive day, the slight decline in its price indicates that economic forces are influencing it more than in previous periods. A slight rise in the U.S. dollar could reduce gold’s appeal to investors, especially as bond yields offer higher financial returns. These movements are visible in the current market, where investors remain cautious, awaiting further details about the Federal Reserve’s upcoming monetary policy.
With the next monetary policy meeting scheduled for December, it seems that markets are adopting a wait-and-see strategy before making new decisions about gold. Expectations regarding the Fed’s actions will shape future market trends. While geopolitical concerns may provide some support for gold in the short term, U.S. economic factors are likely to dominate price movements in the near term. Trader expectations for the Fed’s decisions show low chances of a rate cut in the upcoming meeting, reflecting increased optimism about the strength of the U.S. economy.
On the other hand, I believe that gold, being a non-yielding asset, will continue to face pressure from rising U.S. bond yields. The market is shifting toward assets offering direct returns, such as bonds and stocks, which may lead to reduced demand for gold. Nevertheless, gold remains one of the key assets that investors rely on in times of geopolitical and economic tension, particularly in the absence of a clear outlook for global geopolitical events and their impact on the global economy.
In my view, gold prices will remain in a cautious and anticipatory state, influenced by both geopolitical and economic factors simultaneously. Despite the flow of funds into gold as a haven amid tensions between Russia and Ukraine, the economic conditions within the U.S., particularly the Federal Reserve’s policies, remain the most significant determinant for gold’s future movement. Moreover, the rise in U.S. bond yields and the return of the U.S. dollar’s strength could pose real challenges for gold in the coming weeks. Given these factors, gold will likely remain on a complex path, requiring careful monitoring of both economic and political changes.
