Gold Tumbles as Traders Mull Treasury Pick and Fed Outlook
Gold tumbled as traders digested Donald Trump’s pick of Scott Bessent as Treasury Secretary and looked toward the Federal Reserve’s next interest-rate decision.
Bullion slid as much as 2.1%, after capping the biggest weekly rally in 20 months on Friday as an escalation in the Russia-Ukraine conflict bolstered the metal’s haven appeal. Prices fell on Monday even as the dollar and US bond yields weakened, moves that typically benefit gold.
Markets broadly welcomed the choice of Bessent for Treasury Secretary as a measured choice that would inject more stability into the US economy and financial markets. The hedge fund manager’s nomination has eased concerns over the incoming president’s inflationary agenda, which could reduce gold’s allure as a hedge against price rises.
The Bessent news is a possible driver of gold’s price drop on Monday, along with profit taking following last week’s rally, according to UBS Group AG commodity analyst Giovanni Staunovo.
“Some market participants see him as less negative for a trade war, considering his comments on a phased approach for implementing tariffs,” Staunovo said.
Investors are now focused on the outlook for monetary policy, after a report showed US business activity expanding at the fastest pace since April 2022. Swaps traders see a less-than-even chance the Fed will cuts rates next month. Higher borrowing costs tend to weigh on gold, as it doesn’t pay interest.
