Gold is on the move and staring at its best weekly performance in over a year. Demand for the precious metal is gathering momentum as a safe haven in response to soaring Russian-Ukraine tensions. Having powered through the $2700 an ounce level, it is headed for its highest level in a week after a 5% gain. The rally comes on the metal shrugging off dollar strength in the currency market.
Geopolitical Concerns
Gold has been edging higher even on the US dollar, rallying to a 13-month high in the wake of Donald Trump winning the hotly contested US election. The dollar’s decline following a robust rally to a one-year high last week driven by the Trump trade euphoria also helped bullion. Gold is more attractive to buyers in other currencies when the dollar is weaker. Additionally, it has been giving Bitcoin a run for its money even as the cryptocurrency stares at record highs of $100,000 a coin.
The main catalyst behind gold’s upward momentum is growing concerns over an escalation in the Russia-Ukraine war. Reports that Ukraine’s drones and missiles have struck key oil refineries and radar stations inside Russia are already threatening a full-blown nuclear war. The precious metal shines on soaring geopolitical tensions threatening economic risks.
During international crises, investors gravitate toward safe-haven assets, and since the Middle East conflict broke out in October of last year, gold has surged to several record highs. Given the renewed tensions between Russia and Ukraine and the United States’ veto of a U.N. ceasefire resolution in Gaza, geopolitical risk premiums are still high, guaranteeing gold’s long-term appeal.
Interest Rate Environment
Gold also benefits from a low interest rate environment. Markets pricing a 25 basis point interest rate cut by the Federal Reserve at its December meeting is another factor that continues to fuel gold solid demand as yielding assets lose allure.
According to the founder of the first gold tracking ETF, George Milling Stanley, gold is well positioned to continue edging higher heading into year-end. The strategist expects the precious metal to benefit from solid demand from central banks that are increasingly bolstering their foreign reserves. Strong demand from India and China is expected to be a major tailwind.
Gold Outlook
“Go for Gold” is the advice given by Goldman Sachs analysts, who predict that by December 2025, the price of gold will have risen to $3,000 per ounce. The investment bank highlighted the importance of gold as a hedge against possible economic tail risks, especially those related to the uncertainty surrounding U.S. policy in the wake of President-elect Donald Trump’s election victory.
Commodities’ ability to diversify portfolios is strengthened by the exceptionally broad range of possible US policy changes in 2025. The strategists recommended a variety of investment options, such as shorting copper and purchasing gold, and emphasized how gold could shield investors from situations like Trump’s proposed increased trade tariffs.
Although it remained optimistic about gold, UBS believes investors should be wary after gold’s 35% gain year to date. Nevertheless, analysts at UBS anticipate that the precious metal will surpass other commodities and approach $2,900 per ounce. Since the start of the conflict between Russia and Ukraine in 2022, there has been a significant imbalance between gold and US real rates. While gold doesn’t fall much when US rates rise, it does increase when they fall. According to major financial institutions, central bank demand will emerge as a critical supporting factor despite their differing opinions.
