Gold and oil surge on Ukraine war fears

LONDON/SINGAPORE, Nov 22 (Reuters): Gold, oil, and haven assets from the Swiss franc to German government debt headed for strong weekly gains on Friday after the Russia-Ukraine conflict escalated, while European gas price rises and poor economic data heaped pressure on the euro.
In a week when Russia lowered its threshold for using nuclear weapons and fired a hypersonic intermediate-range ballistic missile at Ukraine, gold was set for its best week in a year.
The euro tumbled to its lowest since December 2022, last at $1.0432 and down 0.4 per cent on the day, after surveys showed business activity in the bloc took a surprisingly sharp turn for the worse this month.
European gas contracts hit a one-year high, broadening concerns for the euro zone economy already pressured by US President-elect Donald Trump's proposed trade tariffs, Germany's government collapse and France's wide budget deficit.
Brent crude futures gained 0.5 per cent on Friday to $74.60 a barrel, up 5 per cent this week, after Russia responded to the US and UK allowing Kyiv to strike its territory with Western weapons by firing a hypersonic intermediate-range missile at Ukraine's Dnipro.
"Those weapons typically carry nuclear warheads," said analysts at ANZ Bank."The exchange indicates the war has entered a new phase, raising concerns around disruptions to (oil) supply."
The index tracking the US dollar against rival currencies climbed to a 13 month peak of 107.15 on Friday, boosted by haven buying as well as expectations that Trump's America-first policies would boost growth and inflation.
Bets that Trump's administration would take a lighter-touch approach to regulation propelled bitcoin to the brink of $100,000 for the first time.
Gold was up 1 per cent at $2,688 an ounce on Friday and 5.2 per cent higher for the week, while sterling dropped 0.4 per cent on the day to a six-month low of $1.253.
Traders expect Trump's tariffs to boost domestic consumer prices, with money markets pricing about a 58 per cent chance of a Federal Reserve rate cut next month, down from 83 per cent a week ago.
That has restricted haven buying of US Treasuries, usually considered the world's least risky and most liquid financial assets, with the benchmark ten-year yield down just 2 basis points this week at 4.3892 per cent.
Geopolitical concerns have raised appetite for European haven assets however.
Germany's 10-year Bund yield dropped 7 bps to 2.244 per cent on Friday, reflecting forecasts for faster European Central Bank rate cuts. The Swiss franc, at €0.9264, was on course for a 1.7 per cent weekly gain.