Gold rebounded sharply on Monday after posting its biggest weekly drop since 2021, as traders weighed the outlook for Federal Reserve rate cuts, given Donald Trump’s return to the White House next year.

By 11:05 a.m. EDT, spot gold had risen over 2% to $2,612.83 per ounce, recovering most of last week’s losses. US gold futures also gained 1.8% to $2,615.70 per ounce in New York.

Bullion posted its steepest weekly drop in more than three years last week as Trump’s proposed tariffs are seen as potential drivers of inflation, which could prompt the Fed to slow its rate-cutting pace.

Given the potential for his policies to be inflationary, about half of swaps traders expect there will probably be a Fed cut next month before his inauguration. This, in turn, would benefit the non-yielding gold.

“Whether the Federal Reserve cuts or not, I think gold technically looks like it wants to get back near that $2,700 level,” Daniel Pavilonis, senior market strategist at RJO Futures, told Reuters.

Also supporting gold is a pause in the US dollar rally. The dollar index surged to a one-year high on Thursday but has since retreated, making gold more affordable to investors.

Goldman bullish

Amongst those bullish is Goldman Sachs, which on Monday reiterated a forecast for prices to rally to $3,000 an ounce by the end of next year, with analysts advising investors to “go for gold.” 

The bank listed a wager on bullion among its top commodity picks for 2025 as the Fed cuts rates, central banks go on buying the precious metal and Trump assumes the presidency.

Bullion has declined about 7% from a record last month, with losses accelerating after Trump’s victory while the dollar surged to a two-year high. Against that backdrop, hedge funds’ bullish wagers fell to the lowest in three months, Commodity Futures Trading Commission data show.

However, Goldman’s analysts said this sell off provides an “attractive entry point to buy gold.”

“Gold’s fundamentally supportive factors never went away,” said Charu Chanana, a strategist at Saxo Capital Markets Pte, noting the dollar’s recent rally had paused.

In addition, geopolitical developments may be driving haven demand, she said, with North Korea said to be considering deploying as many as 100,000 troops to aid Russia’s war on Ukraine.

(With files from Bloomberg and Reuters)

Source: MINING.COM – Read More