• Gold gained for a fifth straight day on Friday amid increased demand in protected markets amid threats from Russia.
• Changing expectations regarding U.S. interest rates and the good performance of the U.S. dollar may be a headwind for the precious metal.
• Technically, XAU/USD is extending giants, fulfilling the promise of the bullish Japanese Three White Soldiers candlestick pattern.

Gold (XAU/USD) is rising for the fifth day in a row, which means it has managed to break the green daily candlesticks so far this week. During Friday’s European session, the price of the precious metal rose again above $2,700 as rising tensions between Russia and Ukraine again sent gold flowing into the protected haven.

That said, the yellow metal’s rally could be capped by a stronger US dollar (USD), which continues to rise amid heightened US inflation expectations, anticipation of the Trump government implementing dollar-positive policies in January, and solid economic activity in the US labor market .

Gold rises as Russia threatens Britain

Gold is gaining in value thanks to increased flows into havens after Russian ambassador to the UK Andrey Kelin told Sky News that the UK is now a legitimate target for Russian missile attacks after it allowed Ukraine to employ British Storm Shadow missiles against Russian territory.

The comments indicate an escalation of the conflict and come after Russia used intercontinental ballistic missiles in an attack on the Ukrainian city of Dnipro. It was a retaliation for Ukraine’s attack on Russian targets in the Kursk Oblast using British long-range missiles. This follows US President Biden’s decision to allow Ukraine to employ US-made ATACMS (Army Tactical Missile System) missiles against targets on Russian soil.

Gold faces headwinds from USD and Fed

Gold may struggle to cope with the US dollar’s rise on Friday, given that the precious metal is primarily priced in USD, and therefore a strengthening dollar tends to lower the price of gold.

This decision comes as expectations regarding interest rates in the US continue to stabilize. While interest rates were previously expected to drop dramatically towards the end of the year, the projected downward trajectory is now shallower. The prospect of continuing relatively high interest rates is negative for gold because it increases the opportunity cost of holding the precious metal.

The change comes partly after U.S. jobless claims data released Thursday showed fewer than expected 213,000 people applied for unemployment benefits in the U.S. in the week ending Nov. 15, down from an expected 220,000.

Given that one of the Fed’s twin missions is to promote full employment, the data suggests that cutting interest rates to spur job creation is less urgent.

Still, claims data wasn’t entirely rosy, with continuing claims for the week ending November 8 rising to 1,908 million, above the 1,870 million expected and previous figure.

Gold demand is also weakened by competition from Bitcoin (BTC), which is rising just below the $100,000 level.

According to Bloomberg News, an augment in Bitcoin Exchange Traded Fund (ETF) inflows in November – ETFs allow investors to own shares that track the price of BTC rather than owning the asset itself – coincided with a similar augment in outflows from gold ETFs. This suggests that gold is suffering as a result of Bitcoin’s outperformance.

Technical Analysis: XAU/USD Is Going Up

Gold extends its upward march on Friday, fulfilling the promise of the bullish Japanese “Three White Soldiers” candlestick pattern (green rectangle in the chart below) that formed during the rebound from last week’s lows.

XAU/USD daily chart

The upward move is supported by the (blue) moving average divergence (MACD) indicator, which is above the red signal line during the day. However, to give the right signal, the crossing must survive until the end of the day.

The short-term trend in this precious metal is up, and given the maxim that “the trend is your friend”, the chances of continued growth are higher. Gold has already broken through its first upside target at $2,686, the September 26 high, and is now preparing to break resistance at the next key level of $2,710, the November 8 high.

A break above $2,710 would be a very bullish signal as it would potentially cement the medium-term trend as bullish. This would mean that all three main trends – short-term, medium-term and long-term – were in an upward phase, giving the green delicate to continue growth.

However, until this level is broken, the precious metal may still be in a medium-term downtrend, maintaining a downside risk to the outlook.