Gold Prices Rise On Geo Political Tensions

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Gold futures on the COMEX division of the New York Mercantile Exchange rose on Tuesday as the US dollar weakened and geopolitical tension dominated the market.

The most active gold contract for December delivery went up $7 (0.66 percent) to settle at $1,073.80 per ounce, Xinhua reported.

Gold Prices Rise On Geo Political Tensions
The precious metal was given support as tensions increased between Russia and Turkey after the latter shot down a Russian fighter jet. Check gold rates here

Turkey is a member of NATO, which is led by western forces and has long been opposed to Russia.

Analysts note that when geopolitical tensions increase, investors move to gold as a safe haven.

It also came as the US Federal Reserve is preparing to raise interest rates at its Federal Open Market Committee (FOMC) meeting scheduled to be held in December.

According to the CME Group's Fedwatch Tool, there is a 78 percent chance of a rate hike at the December meeting.

This is a four percent increase from Monday. Expectations were originally for a delay in the rate hike till 2016 but the FOMC meeting in late October confirmed that the Fed wants to raise rates before the end of 2015.

An increase in the Fed's interest rate drives investors away from gold and towards assets with a return, as the precious metal bears no interest.

There has not been an increase in the Fed's interest rate since June 2006, before the beginning of the American financial crisis.

The US Dollar Index also fell by 0.17 percent to 99.59 on Tuesday. The index is a measure of the dollar against a basket of major currencies.

Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

A report released by the US Department of Commerce on Tuesday showed the third-quarter US Gross Domestic Product was rising at a revised rate of annualised 2.1 percent, up 0.6 from earlier.

This report was in line with expectations, yet since it did not show any unexpected weakness it may contribute to the Fed's willingness to increase rates at the December FOMC meeting.

Silver for December delivery added 12.7 cents (0.91 percent) to close at $14.159 per ounce.

Platinum for January delivery dropped $5.7 dollars (0.67 percent) to clo


Read more about: gold
Story first published: Wednesday, November 25, 2015, 10:54 [IST]
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