A Ukrainian drone strike on St. Petersburg escalated the Russia-Ukraine war, sending gold higher and weighing on the euro, as Zelenskyy prepared for emergency talks with European allies following Putin's rejection of peace negotiations.
Gold jumped to a two-week high above $2,400 as investors sought safety after Ukrainian drones targeted St. Petersburg, escalating the Russia-Ukraine conflict. The attack on a major Russian city drove risk aversion, lifting the precious metal 1.8% to $2,420.
Gold gained 1.8% to $2,420 as the drone strike heightened geopolitical risk, driving investors toward safe-haven assets. The attack on a major Russian city signals an escalation that could disrupt global stability and undermine risk appetite.
The bid could persist for several sessions if tensions remain elevated or if further attacks occur. However, any signs of de-escalation or unexpected diplomatic progress could quickly unwind safe-haven flows.
Gold faces resistance at $2,450; a breakout above could target $2,480. Support sits at $2,380, where the 20-day moving average coincides with the pre-attack price.
The euro slipped 0.3% to 1.1150 as the drone attack near Europe's border raised geopolitical risk, prompting a move into the dollar. The proximity of the conflict to the eurozone weighed on the common currency despite a generally supportive ECB outlook.
The euro dropped 0.3% to $1.1150 because the escalating conflict near Europe's border increases economic risks for the eurozone, prompting a shift to the US dollar as a safer alternative.
A recovery depends on whether the attack is isolated or part of a sustained campaign. If European leaders provide strong support for Ukraine without drawing direct retaliation, the euro might stabilize. Otherwise, further losses toward $1.10 are possible.
Watch the emergency EU summit outcome and any Russian retaliation. Also, US economic data and Fed commentary could either amplify or counteract the safe-haven demand for the dollar.
Ukrainian armed forces launched a drone attack on St. Petersburg, hitting residential and infrastructure targets, after President Putin rejected renewed peace negotiations. The assault marks the first time the war has reached Russia's second-largest city, raising the risk of a broader escalation. European leaders are set to meet with President Zelenskyy amid the attack, with markets pricing a higher geopolitical risk premium.
The attack is a response to Putin's refusal to engage in peace talks and marks an escalation in Ukraine's strategy to bring the war closer to Russian civilians and infrastructure, increasing pressure on the Kremlin.
Safe-haven assets like gold and the US dollar rallied, while risk-sensitive currencies and European equities declined as investors feared a wider war.
The attack and Putin's rejection of talks suggest a prolonged conflict, with diplomatic resolution unlikely in the near term. This could lead to further rounds of military escalation and economic sanctions.