Gold tumbles after report says Israel and Hezbollah strike deal

On By Littum

(Bloomberg) — Gold tumbled on signs of de-escalating geopolitical signs in the Middle East.

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Israel is potentially days away from a ceasefire deal with Lebanon’s Hezbollah, the Israeli ambassador to the US said. Prices extended losses after Axios reported that Israel and Lebanon have agreed to the terms of a cease-fire deal. The parties have not yet published an agreement, it says.

Bullion tumbled as much as 3% as traders liquidated positions built last week amid rising geopolitical tensions, helping the metal record its biggest weekly rally in 20 months.

Traders also digested President-elect Donald Trump’s selection of Scott Bessent as Treasury Secretary. It is seen as a measured choice that would add more stability to the US economy and financial markets. The hedge fund manager’s nomination has eased concerns about the incoming president’s inflationary agenda, which could reduce gold’s appeal as a hedge against price rises.

The Bessent news is a possible driver behind gold price declines on Monday, along with profit-taking after last week’s rally, according to UBS Group AG commodities analyst Giovanni Staunovo.

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“Some market participants see him as less adverse to a trade war, given his comments about a phased approach to implementing tariffs,” Staunovo said.

Investors are now focused on the outlook for monetary policy after a report showed U.S. business activity grew at the fastest pace since April 2022. Swaps traders see a less than even chance the Fed will cut interest rates next month. Higher borrowing costs tend to weigh on gold as it does not pay interest.

A series of data this week could provide clues about the Fed’s likely interest rate path. These include minutes from the central bank’s November meeting, consumer confidence and data on personal consumption expenditure – the monetary authority’s favorite gauge of inflation.

Gold is still up about 30% this year, supported by central bank purchases and the Fed’s pivot to rate cuts. Haven purchases have also been a feature of an escalation in the Russia-Ukraine war. Most banks remain positive about the outlook, with Goldman Sachs Group Inc. and UBS sees further progress in 2025.