Gold price has entered the new week in the green, rallying above the psychological level of $2,000 per ounce. At an intraday level of $2,001.33, the precious metal rose to its highest level since August 2020 when it hit a record high of $2,076.09.
At the time of writing, it had pulled back to $1,990.13. In the past week, it rose by 4.34%; recording its largest weekly gain since July 2020.
![gold price](https://invezz.com/wp-content/uploads/2022/03/gold-3-1024x409.png)
Safe haven demand
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Since bouncing off the crucial support zone of 1,800 in late January, gold price has been in the green for four out of the past five weeks. The uptrend has been boosted by its status as a safe haven, amid the ongoing Russia-Ukraine crisis.
Ordinarily, the precious metal – similar to other commodities – has an inverse correlation with the value of the US dollar. However, both assets are conventional safe havens. Subsequently, the ongoing geopolitical tensions in eastern Europe has increased the demand for both entities.
At the time of writing, the dollar index, was at $98.85. Based on both the fundamentals and technicals, it is in good shape to recording the fifth consecutive week of gains.
In the new week, the Russia-Ukraine war will likely remain the key bullish driver of gold price. On Sunday, President Putin indicated that the war will continue till when Ukraine accepts the stipulated demands. His remarks have suppressed hopes of successful negotiations in the immediate term. Subsequently, it has raised concerns over higher inflationary pressures as commodity prices surge to multi-year highs. Wheat, crude oil, natural gas, fertilizers, and base metals are some of the products that have risen significantly in recent weeks.
Interest rate hikes
The recorded surge in gold price comes at a time when the Federal Reserve is expected to increase interest rates for the first time since December 2008. The US central bank is scheduled to hold its monthly meeting on 15th – 16th March.
As indicated by the Fed Chair, a quarter point rate hike will be appropriate. Notably, an environment of higher interest rates tends to weigh on gold price as it rises the opportunity cost of holding the non-yielding bullion.
Since mid-last week, US bond yields have been on a decline; an aspect that has further boosted gold and other precious metals. The benchmark 10-year Treasury yields dropped from 1.91% in the previous week to a two-month low of 1.66% in early Monday trading. It has since bounced off from those lows to 1.71% as at 08:00 a.m GMT. Its rebound will likely yield a further pullback from gold’s intraday high ; even as geopolitics sustains its uptrend.
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Source: https://invezz.com/news/2022/03/07/gold-price-outlook-hopes-for-russia-ukraine-settlement-dwindles/