Gold Prices Resume Climb

Gold prices (XAU/USD) extend their intraday rally, reaching a fresh one-and-a-half-week high near the $2,664-2,665 mark during the early European trading session on Thursday. The ongoing upward trend, observed since the start of the week, is largely driven by escalating geopolitical tensions linked to the Russia-Ukraine conflict, which continues to bolster demand for safe-haven assets like gold. Additionally, a slight weakening of the US Dollar (USD) further supports the precious metal’s rise.

On the other hand, expectations surrounding potential inflationary pressures from U.S. President-elect Donald Trump’s proposed tariffs are contributing to sustained high U.S. Treasury yields. This, combined with a generally optimistic market sentiment, could temper aggressive bullish moves in XAU/USD. Market participants now turn their attention to upcoming U.S. economic data and speeches from Federal Reserve officials for new directional cues.

Gold Gains Amid Geopolitical Uncertainty

Gold continues to benefit from its haven status as geopolitical risks intensify. Russian President Vladimir Putin’s recent lowering of the nuclear strike threshold has added to the conflict’s uncertainty, fuelling a fourth consecutive day of gains for the metal.

At the same time, market sentiment suggests that President-elect Trump’s expansive policy plans could increase inflationary pressures, potentially limiting the Federal Reserve’s flexibility to continue its rate-cutting cycle. Several Federal Reserve officials have also highlighted a cautious stance on further monetary easing. For instance, Fed Governor Lisa Cook recently stated that a slowdown in inflation progress might force the central bank to pause rate cuts. Similarly, Fed Governor Michelle Bowman expressed concern that inflation advancements have stalled, advocating a careful approach to future policy adjustments. Boston Fed President Susan Collins echoed this cautious tone, emphasizing the need for deliberate action on interest rate changes to avoid missteps.

Market Focus Shifts to US Data and Fed Signals

The CME Group’s FedWatch Tool shows that traders are currently assigning slightly over a 50% probability to a December rate cut by the Federal Reserve. Meanwhile, the yield on the 10-year U.S. Treasury bond saw its strongest weekly increase on Wednesday, which, alongside positive risk sentiment, could limit gold’s upside potential.

Thursday’s U.S. economic calendar includes key releases such as Weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, and Existing Home Sales data. In addition, market participants will closely monitor remarks from Federal Reserve officials for insights into the future trajectory of monetary policy. These developments are expected to influence the U.S. Dollar and, consequently, the outlook for XAU/USD.

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