Gold has experienced heightened volatility recently. This week, prices dropped significantly, and several factors contributed to the decline. Let’s break it down.
First, on Monday, reports suggested that Israel and Hezbollah might be close to reaching a truce. The prospect of a ceasefire in the Middle East reduced gold’s appeal as a safe-haven asset. In response, traders sold off gold, driving XAUUSD rate down by more than 4%.
Second, Scott Bessent was announced as President-elect Donald Trump’s pick for Treasury Secretary. Investors reacted positively to the news, as Bessent, a prominent global macro investor, is expected to implement pro-market policies in his role. His appointment signals a shift in focus toward stock-friendly measures rather than safe-haven investments like gold.
As a result, demand for gold has cooled, with investors redirecting their attention to risk assets and the U.S. dollar. Gold is now down about 6% from its all-time high of $2,790 per ounce, reached in late October.
However, on Friday morning, gold prices edged higher, surpassing $2,660 per ounce and briefly hitting a session high of $2,665. The increase is likely driven by optimism among gold investors about the Federal Reserve’s anticipated interest rate cut next month.
With the Fed’s preferred inflation measure, the PCE index, showing a 2.3% growth rate as expected, central bank officials may feel confident enough to lower borrowing costs during their December 17–18 meeting.
However, despite Friday’s uptick, gold is on track to close the week with a 1.7% loss, as markets remain hesitant to shift significant funds into safe-haven assets.
