Gold prices dip after reaching 20-month high

Gold prices tumbled by nearly 2%, falling back below $2,700 an ounce after last week’s surge, which marked the biggest rally in 20 months.

The decline came despite a softer US dollar, which typically supports gold, as traders shifted their focus to the Federal Reserve’s upcoming interest-rate decision, News.Az reports, citing foreign media.

Bullion fell by almost 2% to drop back below $2,700 an ounce, despite a slide in the US currency, which typically aids the commodity.

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 central bank will cuts rates next month. Higher borrowing costs tend to weigh on gold, as it doesn’t pay interest.

The precious metal is still up by more than a quarter this year, supported by central bank purchases and the Fed’s pivot to rate cuts. Haven buying has also been a feature, with prices rallying 6% last week, on an escalation in the Russia-Ukraine war. Most banks remain positive about the outlook, with Goldman Sachs Group Inc. and UBS Group AG seeing further gains in 2025.

The drop in the dollar on Monday — which was accompanied by a decline in US bond yields — came after US President-elect Donald Trump nominated Scott Bessent to oversee the Treasury. Investors expect the hedge fund manager to prioritize economic and market stability over more radical measures.

Spot gold retreated 1.6% to $2,673.94 an ounce as of 12:02 p.m. in Singapore, dropping along with silver, platinum and palladium.

News.Az