Market concerns about the volatility being generated by escalating tensions between Russia and the United States, combined with a subdued dollar, are driving safe-haven assets demand and pushing gold prices higher for the third day in a row.

The decision by Joe Biden’s administration to allow Kyiv to attack targets on Russian territory with US long-range ATACMS missiles has added fuel to the fire of the war in Ukraine and continues Washington’s escalation. This shift in US posture increases the possibility of the armed conflict spilling over the Russian-Ukrainian border.

Given that using these missiles requires the intervention of US military operatives, the Kremlin sees this decision as tantamount to a direct US entry into the conflict. The Russian government’s response merely reiterates what it had already announced a few months ago in the face of the possibility of NATO weaponry being used to attack its territory.

In this sense, following Russia’s confirmation of the first attack with these missiles against a military installation on Russian territory, Russian Foreign Minister Sergey Lavrov said that ‘it is a sign that the West is looking for an escalation’. Meanwhile, President Vladimir Putin has already approved a decree relaxing the requirements for the use of nuclear weapons.

Gold prices hit new highs

Against this backdrop, gold prices are recovering after plummeting to a three-week low in the face of Donald Trump’s decisive victory thanks to strong Treasury yields and a stronger dollar.

This precious metal’s price rose for the third consecutive day, diametrically opposed to the dollar, reaching a one-and-a-half-week high of around 2,500 euros per ounce. This appreciation has been mirrored by the value of other safe-haven assets and by the yield on 10-year US Treasuries, trading around 4.35% on Tuesday.

Although investors remain concerned about the risk of a further escalation of geopolitical tensions between Russia and the United States in Biden’s remaining two months in office, the inauguration of Donald Trump’s presidency is expected to signal the start of a possible negotiation to end the proxy war between these two powers on Ukrainian soil.

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