by Sybilla Gross
Gold advanced after posting its biggest weekly drop since 2021, as the dollar edged lower and traders weighed the outlook for Federal Reserve rate cuts given Donald Trump’s return to the White House next year.
Bullion rose by more than 1% to above $2,590 an ounce Monday. Goldman Sachs Group Inc. 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.
While Trump’s win has clouded the outlook for rate reductions next year, 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. Lower borrowing costs benefit gold, as it doesn’t pay interest.
Bullion has declined about 7% from a record last month, with losses accelerating after Trump’s victory, which spurred a surge in the dollar to a two-year high. Against that backdrop, hedge funds’ bullish wagers fell to the lowest in more than three months, Commodity Futures Trading Commission data show.
However, Goldman 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 several Fed policymakers due to speak this week, some have already signaled an openness to more easing. On Friday, the Fed Bank of Chicago’s Austan Goolsbee said as long as inflation continued down toward the bank’s 2% goal, rates would be “a lot” lower over 12 to 18 months. Fed Bank of Boston President Susan Collins said a December reduction remained on the table.
Spot gold was up 1.2% to $2,593.11 an ounce at 9:41 a.m. in London, bringing this year’s gains to 26%. The Bloomberg Dollar Spot Index eased for a second day, dipping 0.1%. Silver, platinum and palladium all advanced.
Copyright Bloomberg News
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