Gold prices extend gains on rising geopolitical risks

Gold prices rose from $2,660 per ounce to $2,690 per ounce on Tuesday, on rising geopolitical risks. If gold prices rise, they may encounter resistance at $2,716 per ounce, while if gold prices decline, support may be encountered near $2,610 per ounce. 

Gold prices gained strength this week as the Bank of China announced over the weekend that it is going to resume gold purchases after a six-month break. 

Geopolitical tensions continue to rise, boosting demand for safe-haven assets. The civil war in Syria was rekindled last week, further destabilizing the region. In a surprise offensive, Syrian rebels have captured Damascus and toppled the government. President Bashar al-Assad was forced to flee the country and according to recent reports he has asked for Asylum in Moscow. The Syrian rebel army is currently in charge and political instability in Syria is reigniting geopolitical risks, boosting gold prices.

Meanwhile, a 60-day ceasefire between Israel and Lebanon has been officially declared. Reports, however, that Israel has been repeatedly violating the ceasefire, propped up gold prices last week. In addition, Russian President Vladimir Putin stated that Russia may use its new nuclear-capable missiles against Ukraine in response to Ukraine’s using long-range missiles to attack Russian territories.

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar gained strength on Tuesday, and the dollar index rose from 106.1 to 106.4. US treasury yields gained strength, with the US 10-year bond yield rising from 4.20% to 4.23%. 

In addition, gold prices are supported by increased Fed rate cut expectations. The US Federal Reserve cut interest rates by 25 basis points in November to a target range of 4.50% to 4.75%. Market odds of a December rate cut rose to 90% after the release of robust US labor data on Friday, boosting gold prices. 

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Written by:
Myrsini Giannouli

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