Gold prices plunged nearly 3% after President-elect Donald Trump appointed Scott Bessent as his Treasury Secretary, while news of a potential ceasefire deal between Israel and Hezbollah further diminished the appeal of the safe-haven metal. The sharp decline in gold prices followed growing investor optimism, which saw the yellow metal’s value fall significantly.
Spot gold prices dropped by 3.44%, reaching $2,616.80 per ounce, according to Factset data, while gold futures on the New York Mercantile Exchange were trading at $2,628.5 per ounce. The sudden decline in gold mirrors the scale of the selloff seen immediately after the U.S. election in November 2016, with MKS Pamp’s head of metals strategy, Nicky Shiels, noting that the ~$100 drop was “as severe in size & pace” as that post-election market movement.
The news of a possible ceasefire between Israel and Hezbollah, announced by Israel’s ambassador to the U.N., Danny Danon, helped boost risk sentiment in the markets. Danon mentioned that Israel was working toward a ceasefire with Hezbollah, although he emphasized that the deal was not finalized yet and that some unresolved issues remained. U.S. National Security Advisor John Kirby also described the ceasefire discussions as productive but noted that “nothing is done until it’s all done,” suggesting that negotiations were still ongoing.
Additionally, the appointment of Scott Bessent, a hedge fund manager, to the position of Treasury Secretary raised expectations of a more supportive environment for the equity markets, further eroding gold’s status as a safe-haven asset. Investors are now viewing the potential for more risk-taking in the markets, which is adding to gold’s price reversal.
Commodity strategist Daniel Ghali from TD Securities pointed out that gold’s price correction could also be attributed to “buying exhaustion” as physical demand, particularly from Asian central banks, has notably weakened in recent months. Reports from the Shanghai Gold Exchange indicated heavy selling by Chinese investors overnight, which added further pressure to gold prices.
Moreover, the outlook for U.S. monetary policy has shifted. While the Federal Reserve had been expected to cut interest rates in December, the probability of a rate cut now stands at 56%, down from 75% a month ago. Rising interest rates generally make gold less attractive compared to interest-bearing assets like Treasuries.
With a stronger dollar and new tariff proposals from Donald Trump, gold’s appeal continues to wane, as higher tariffs on imports from China, Mexico, and Canada add uncertainty to global markets. Despite this, analysts like Shiels and Robert Eckford of Rua Gold maintain that gold prices may still head toward $3,000 by 2025, with ongoing volatility expected as the Donald Trump administration settles into power.
