FX168 Financial News (Europe) reported on Friday (December 27) that international Gold prices have slightly retreated but are still expected to see weekly gains due to political uncertainties in the Middle East prompting investors to turn towards.Its price has soared to a historic high, closely related to market expectations of interest rate cuts by the Federal Reserve., partially offsetting the pressure from the strong USD.

As of the time of publication, spot Gold has fallen by 0.2% to around $2,630, up 0.3% so far this week.

"There are still geopolitical hotspot issues globally, which continue to maintain Gold's appeal as a safe-haven asset," said Tim Waterer, Chief Market Analyst at KCM Trade. He stated, "Whether it's the Russia-Ukraine conflict or the situation in Gaza, investors remain focused on Gold in case these situations deteriorate further."

In the Middle East, Israel attacked multiple targets related to Iranian-backed Houthi forces in Yemen on Thursday. Meanwhile, in Ukraine, Russian Drones struck a multi-story apartment building in the front-line city of Chasiv Yar in the Donetsk region on Thursday.

On the 26th, Israel launched airstrikes on various locations, including Sana'a International Airport, the capital of Yemen, resulting in at least 6 deaths and 40 injuries. According to a statement from the Houthi-controlled Masirah Television, the Houthis vowed to retaliate against the Israeli military's attacks, stating, "We will carry out retaliatory long-range rocket strikes on Israeli cities."

Regarding the Russia-Ukraine situation, Chasiv Yar in Donetsk has been under attack by Russian forces for the past few months. The Donetsk region is a focal point of Russia’s westward offensive across the entire Donbas. The Donbas includes the regions of Donetsk and Luhansk, where Russia has been supporting pro-Russian forces since 2014.

On Christmas Day, Russia launched a large-scale missile and drone attack on energy facilities across Ukraine. The Ukrainian military stated on Thursday evening that air defense forces shot down 20 out of 31 drones fired by Russia during the night.

The further space for the rise in Gold prices is limited by the USD, with the USD index measuring against the Japanese Yen, Euro, British Pound, and three other major MMF rising by 0.08% to 108.16, expected to increase for the fourth consecutive week. Due to many traders being on vacation during Christmas and New Year’s, the index has remained steady around 108 points for the entire week.

The USD index has cumulatively risen by 2.2% this month. So far, the index has risen by 6.7% in 2024. The strengthening of the USD makes Gold more expensive for holders of Other currencies.

So far this year, Gold prices have increased by 28% and reached a historical high of $2,790.15 on October 31, due to reasons including the Fed’s rate cuts and escalating global tensions.

After lowering rates in September and November, the Fed continued with an easy monetary policy in December, while also hinting at a possible reduction in the frequency of rate cuts in 2025. Fed Chairman Powell stated earlier this month that officials would "exercise caution regarding further rate cuts."

As Donald Trump is set to return to the White House in January 2025, the market is preparing for a large-scale shift in policy, including tariffs, deregulation, and tax revisions.

Gold typically performs well during periods of economic and geopolitical uncertainty, and is especially strong in low interest rate environments.