Gold is headed for its biggest weekly gain since October last year as the escalating Russia-Ukraine conflict boosts its safe-haven appeal, with traders also weighing the prospect of further easing by the Federal Reserve.

Bullion rose 1.4% to $2,706.73 an ounce at 9:43 a.m. in London after Ukraine said Russia launched a "new" type of ballistic missile toward the city of Dnipro in a worrying signal to Kyiv's Western backers. Rising geopolitical tensions tend to drive investors into safe-haven assets, such as bullion.

"The counter-escalation between Russia and Ukraine has raised the geopolitical temperature to levels higher than seen during the year-long war between Israel and Iranian-backed militants, and markets have responded accordingly," said Ole Hansen, head of commodity strategy at Saxo Bank. The renewed safe-haven demand "has injected fresh momentum back into the market after the early November correction," Hansen added.

Traders also weighed comments from Chicago Fed President Austan Goolsbee, who said he sees interest rates moving "a little lower," and expressed confidence that inflation is easing toward the central bank's target. Lower interest rates typically benefit bullion because it doesn't pay interest.

The precious metal has surged about 30% so far this year, supported by healthy central bank buying, rising demand for safe-haven assets and the Fed's rate-cutting cycle. The precious metal's rally stalled in the weeks following Donald Trump's re-election, as the dollar surged to a record, weighing on the commodity.

There are broad expectations for a new record in 2025, with Goldman Sachs Group Inc. and UBS Group AG both issuing bullish outlooks for the precious metal in recent days.

Source: Bloomberg