Gold Keeps Firm Despite USD’s Resurgence

Gold has managed to hold firm despite the resurgence of the US dollar. Gold’s safe-haven appeal is still supporting the price within the familiar daily trading range.

The gold price is settling in for the end of the North American session around flat for the day having traveled between a low of $1,655.71 and a high of $1,684.95, so it is trading at $1670.30 so far.

The precious metal has found demand on renewed geopolitical concerns following Russia’s president, Vladimir Putin, saying he will send more troops into his war against Ukraine while threatening to use nuclear weapons.

In the face of battlefield setbacks, the Russian leader has doubled down. Russia will mobilize 300,000 additional troops, a number larger than the original invasion force, and Moscow also appears poised to annex Ukrainian territory under its control.

The threat of a wider war is reviving the appeal of the precious metal due to its safe haven role in financial markets despite a bid in the US dollar that is trading near the highest in 20 years, supported by the Fed’s 75 basis-point increase to US interest rates on Wednesday and its promise that rates will rise again until inflation is under control.

Futures after FOMC decision imply traders see 89% chance fed raising rates at another 75bps at the November meeting. In this context, the precious metals’ price action could still have further to fall as the restrictive rates regime is set to last for longer.

Gold and silver prices have tended to display a systematic underperformance when markets expect the real level of the Fed funds rate to rise above the neutral rate. Meanwhile, from a technical perspective, there are still prospects of a move higher from out of the sideways channel as per the M-formation which is a reversion pattern.