Gold prices edged higher on Monday as traders assessed US President Donald Trump’s announcement of an immediate energy ceasefire between Russia and Ukraine, while renewed attacks in the Middle East threatened to intensify inflationary pressures.
At 07:30, XAU/USD rose 0.3% to $4,206.86 per ounce after gaining 1.3% last week. Silver (XAG/USD) advanced 0.6% to $60.99 per ounce, while platinum and palladium also traded higher. Meanwhile, Brent crude oil prices fell 1.2%.
Russia-Ukraine Energy Truce Offsets Middle East Risks
Trump said an immediate energy ceasefire between Russia and Ukraine had taken effect, raising hopes of improved global fuel supply conditions.
Earlier, Trump had urged Ukrainian President Volodymyr Zelenskyy to halt attacks on Russian oil refineries. He also indicated that Moscow had agreed to release diesel supplies to global markets, potentially easing concerns over fuel shortages.
However, renewed violence in the Middle East continues to threaten regional energy security. Saudi Arabia’s King Khalid International Airport in Riyadh was reportedly targeted by Houthi forces on Sunday, following an attack on Saturday that killed 12 people and injured more than 300.
The Saturday incident was reported as the deadliest attack in Saudi Arabia since the Iran war began in late February.
The Houthis described their attacks as retaliation for what they called Saudi aggression, including strikes against an airport in Yemen’s capital, Sanaa. The latest escalation has raised concerns that the conflict could spread further across the region, potentially pushing energy prices higher and strengthening the case for tighter monetary policy.
Although oil prices have eased, gold has lost approximately one-fifth of its value since the US-Iran war erupted in late February.
Higher energy costs and broader inflation risks have prompted some central banks to raise interest rates, creating a headwind for gold because the precious metal does not pay interest. When borrowing costs rise, yield-bearing assets can become more attractive relative to gold.
Central Bank Demand Supports Gold Prices
According to ANZ analysts, gold’s recent performance has been supported by stronger investment demand, with inflows into gold-backed exchange-traded funds (ETFs) reaching their highest level in four years, based on Bloomberg data.
The analysts attributed growing investor interest to mounting fiscal pressures worldwide, particularly concerns over government debt-servicing costs and expanding money supply. Central banks have also continued to increase their gold reserves, providing additional support for the precious metal.
The People’s Bank of China added 740,000 ounces of gold to its reserves in September, extending its buying streak to 23 consecutive months.
Continued central bank purchases and strong ETF inflows could help cushion gold against short-term market volatility, particularly as investors seek protection against fiscal uncertainty and currency risks.
Nevertheless, ANZ warned that inflation risks could limit further gains if persistent price pressures prompt the Federal Reserve to tighten monetary policy further.
Higher interest rates remain a major concern for gold, as rising borrowing costs increase the opportunity cost of holding a non-yielding asset. If inflation accelerates and the Fed adopts a more restrictive stance, gold could face renewed selling pressure.
Gold Outlook: Inflation and Energy Supply in Focus
Gold prices remain influenced by competing forces. Hopes of improved fuel supplies following the proposed Russia-Ukraine energy ceasefire could ease inflation concerns and support the precious metal. Conversely, escalating Middle East tensions could disrupt energy markets, push oil prices higher, and reinforce expectations of tighter monetary policy.
Investors will therefore continue monitoring developments in the Russia-Ukraine conflict, energy supply risks in the Middle East, and the outlook for US interest rates.
For XAU/USD, the ability to sustain gains above $4,200 will remain an important near-term signal. However, the broader direction of gold prices will depend on whether safe-haven demand and central bank purchases can offset the pressure from elevated inflation risks and potentially higher interest rates.