PRECIOUS-Gold rallies on safe-haven demand, set for best week in over a year

Updates with U.S. trade

By Sherin Elizabeth Varghese

Nov 22 (Reuters) - Gold prices breached the $2,700 threshold for the first time in two weeks on Friday, on track for their biggest weekly gain in over a year, as safe-haven demand outweighed dollar strength and lower expectations of a U.S. rate cut next month.

Spot gold XAU= was up 1% at $2,696.77 per ounce by 10:14 a.m. ET (1514 GMT), having earlier hit its highest since Nov. 8 at $2709.99. U.S. gold futures GCcv1 rose 0.9% to $2,698.90.

"The escalation in the Russia-Ukraine conflict seems like it's expanding to a Russia-U.S. war, and that's definitely boosting short-term safe haven appeal," said Alex Ebkarian, chief operating officer at Allegiance Gold.

Bullion has gained over 5% this week, poised for its best weekly performance since last October, when the Middle East conflict first ignited, sparking a rally that pushed gold to multiple record highs.

Gold's surge this week has been propelled by the intensifying Russia-Ukraine crisis, lifting prices more than $173 from last Thursday's two-month low of $2536.71.

Bullion tends to shine during periods of geopolitical tension, economic risks, and in a low interest rate environment.

Gold’s rise continued on Friday even as the U.S. dollar .DXY hit a over 13-month high and bitcoin BTC= reached an all-time peak. MKTS/GLOB

Expectations for a December rate cut from the U.S. Federal Reserve have diminished, with the likelihood now at 56%, a sharp drop from 82.5% just a week earlier. FEDWATCH

Some Fed policymakers this week expressed concern that inflation progress may have stalled, advocating for caution, while others emphasized the need for continued rate cuts.

With ongoing policy shifts, and inflation risks from U.S. President-elect Donald Trump's proposed trade tariffs, gold’s outlook stays strong, with a test of $2,750 expected by mid-December, Ebkarian said.

Spot silver XAG= rose 1.4% to $31.22 per ounce, palladium XPD= fell 1.5% to $1,014.25, while platinum XPT= gained 0.9% to $969.25. All three metals were on track for a weekly rise.

"In our view, the price of platinum in particular should rise significantly, as the market is likely to be in deficit for the third year in a row in 2025," Commerzbank analysts noted.

(Reporting by Sherin Elizabeth Varghese in BengaluruEditing by Christina Fincher)

((sherinelizabeth.varghese@thomsonreuters.com;))