Gold prices kicked off the new trading week with little movement, despite the US dollar pulling back from its two-year peak on Friday. After gold’s strong recovery last week, some experts are skeptical about the durability of the precious metal’s rally, attributing it to temporary geopolitical tensions in Eastern Europe.
As of early Monday (November 25) in Vietnam, the spot gold price in Asian markets was hovering around $2,717.40 per ounce, up by a marginal $0.50 from its previous close in New York, according to Kitco data. At this level, the price translates to approximately VND 83.5 million per tael, based on Vietcombank’s selling exchange rate.
Gold prices climbed 5.7% last week, marking the biggest weekly gain since March 2023. Gold prices, in terms of Vietnamese dong, rose by VND 4.4 million per tael over the week.
The primary driver of gold’s ascent last week was the heightened risk appetite amid escalating armed conflicts between Russia and Ukraine, with both sides employing more dangerous weapons. Gold’s resilience was evident even as the US dollar strengthened, showcasing its role as a safe haven.
The US Dollar Index (DXY), which measures the greenback’s strength against a basket of six major currencies, rose 0.75% last week, bringing its one-month gain to 3.1%, per MarketWatch data. On Friday, the index closed at nearly 107.5 points, its highest level since late 2022.
In a report, Swiss bank UBS asserted that gold’s surge last week reinforced its role as “the preferred hedge against geopolitical tensions.”
“On Thursday, Russia fired a supersonic missile at eastern Ukraine, which Ukrainian President Volodymyr Zelenskiy called ‘a clear and serious escalation.’ This move came after Ukraine used modern Western-made missiles to strike targets deep inside Russia,” the report highlighted.
Given the circumstances, UBS maintained its target of $2,900 per ounce for gold through the end of 2025, partly because gold is also an asset that helps investors preserve value amid “political pressures, including high public debt.”
Regarding the US dollar, UBS argued that the DXY is “entering a period of uncertainty,” even though the incoming administration of President-elect Donald Trump could implement tariffs and pro-growth policies that would benefit the greenback in the short term.
“We believe the US dollar’s appreciation is limited, and its rate may be overstretched,” the report stated.
Offering a more cautious perspective, Naeem Aslam, chief investment officer at Zaye Capital Market, said he wouldn’t be surprised if gold entered a consolidation phase this week, given its sharp rise last week despite the strengthening US dollar and robust US stock market.
“It’s unusual for both risky and safe assets to rise simultaneously. The main reason here is that investors are reacting to escalating geopolitical tensions between Russia and Ukraine, but they remain optimistic that things won’t spiral out of control because they believe the incoming president can ease those tensions,” Aslam explained.
Similarly, Ole Hansen, head of commodity strategy at Saxo Bank, attributed the recent gold rally primarily to safe-haven demand, adding, “Unless there are further escalations in Eastern Europe, gold’s upside from here could be limited until the market gains more clarity on Trump’s policies and the path of interest rates set by the Federal Reserve.”
However, Hansen noted that the safe-haven demand for gold due to geopolitical risks might not be sustainable, but the market still holds a strong belief in the precious metal’s upside potential. He emphasized that most of the selling pressure on gold over the past three weeks had come from speculators taking profits, and there was little evidence of short-selling.
Year-to-date, gold prices have surged over 30%, outpacing the 25% gain in the S&P 500, the broadest measure of US stocks.
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