Gold Advances After Worst Weekly Decline Since 2021 as Dollar Eases
Gold prices advanced on Monday after experiencing their steepest weekly drop since 2021, as the U.S. dollar eased and traders assessed the potential for Federal Reserve rate cuts given Donald Trump's anticipated return to the White House next year. Spot gold climbed more than 1% to above $2,597 per ounce, following a loss of more than 4% in the prior week.
The return of Trump to the presidency has cast uncertainty on the outlook for interest rate cuts, as his policies are perceived as potentially inflationary. Despite this, around half of swaps traders believe there may still be a Federal Reserve rate cut next month ahead of Trump's inauguration. Lower borrowing costs are typically supportive of gold since the precious metal does not offer interest payments.
Gold also received an additional boost from a bullish outlook by Goldman Sachs Group Inc., which reiterated its forecast for gold prices to rally to $3,000 per ounce next year. The bank has listed a bet on gold among its top commodity picks for 2025, driven by anticipated Fed rate cuts, continued central bank purchases, and Trump's presidency.
The recent losses in gold have seen bullion drop about 7% from a record high reached last month, fueled by a surge in the dollar to a two-year high following Trump's victory. Against this backdrop, hedge funds have reduced their bullish positions to the lowest level in over three months, according to data from the Commodity Futures Trading Commission.
"Gold’s fundamentally supportive factors never went away," said Charu Chanana, a strategist at Saxo Capital Markets Pte. Chanana noted that the recent rally in the dollar has paused, offering some respite to gold. She also pointed out that geopolitical factors, including reports that North Korea is considering deploying up to 100,000 troops to support Russia in its ongoing conflict in Ukraine, may be driving haven demand.
Several Federal Reserve policymakers are expected to speak this week, with some already signaling openness to further easing. On Friday, Federal Reserve Bank of Chicago President Austan Goolsbee stated that as long as inflation continues to trend toward the 2% target, rates would likely be "a lot" lower over the next 12 to 18 months. Similarly, Federal Reserve Bank of Boston President Susan Collins suggested that a December rate reduction remains a possibility.
Spot gold, which is still up 26% year-to-date, rose 1% to $2,589.34 per ounce at 11:23 a.m. in Singapore. The Bloomberg Dollar Spot Index eased for a second day, dipping by 0.1%. Other precious metals also advanced, with silver, platinum, and palladium all trading higher.
