Gold Prices Take a Hit as Investors Cash In on Recent Gains
Following a remarkable five-session rally to a three-week high, gold prices plummeted by as much as 2% on Monday. The sudden decline was attributed to investors booking profits, as well as the announcement of Scott Bessent as the new U.S. Treasury Secretary, which tempered safe-haven buying.
Profit-Taking and a New Treasury Secretary
Spot gold prices dropped 1.5% to $2,673.30 per ounce by 0943 GMT, with an earlier decline of 2% in the session. U.S. gold futures also shed 1.4% to $2,674.90. According to UBS analyst Giovanni Staunovo, two key factors contributed to the decline: profit-taking after the solid rally last week, and the nomination of Scott Bessent as the next U.S. Treasury secretary. Market participants view Bessent as less negative for a trade war, which may reduce the chance of severe tariffs on U.S. trade partners.
Gold’s Traditional Safe-Haven Status
Gold is traditionally seen as a safe investment during economic and political risks. However, some strategists believe that Bessent’s nomination brings a sense of relief, as he understands markets and may reduce the likelihood of severe tariffs. This perception has led to a decrease in demand for gold as a safe-haven asset.
Market Watch: Upcoming Economic Indicators
Market participants are eagerly awaiting the Federal Reserve’s November FOMC meeting minutes, GDP data (first revision), and core PCE figures, all due this week. These indicators will provide valuable insights into the state of the economy and may influence gold prices.
Rate Cut Expectations
The markets are broadly expecting the U.S. Fed to cut rates by 25 basis points at its next meeting on Dec. 18. However, traders have scaled back bets on this outcome over recent days. According to the CME Fedwatch tool, traders currently see a 56% chance of another 25 basis points rate cut in December. Frank Watson, market analyst at Kinesis Money, notes that while a rate cut is still expected, the dot plots suggesting fewer rate cuts next year will be crucial for markets.
Precious Metals Take a Hit
In addition to gold, other precious metals also experienced declines. Spot silver fell 1.7% to $30.78 per ounce, platinum was down 1.1% to $952.60, and palladium slipped 0.4% to $1,005.25.
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