Potentially reduced conflict in the Middle East and Trump’s Treasury pick may have acted as drivers for the stock rally.
Gold prices declined on Nov. 25 following reports of a potential cease-fire in the conflict between Israel and the Hezbollah terrorist group, while stock markets experienced record gains.
Spot gold
prices opened at $2,715 per ounce on Monday, falling by more than 3.3 percent to close at $2,625 per ounce. The decline came after five consecutive days of rising prices and erased gains made in the previous three days.
On Nov. 25, Michael Herzog, Israel’s ambassador to the United States,
said in an interview with Israel’s Army Radio that Tel Aviv and Hezbollah were “close to a deal” and a cease-fire agreement. While there were still issues that need to be resolved, the cease-fire “could happen within days,” he said.
The yellow metal has so far been buoyed by safe-haven demand triggered by tensions in the region.
Gold prices are also facing downward pressure after President-elect Donald Trump
nominated hedge fund manager Scott Bessent to head the U.S. Treasury Department, according to a Saxo Bank analyst.
Bessent’s appointment contributes to a “more optimistic economic outlook,” Ole S. Hansen, head of commodity strategy at Saxo Bank, said in a Nov. 25
post on social media platform X. A positive outlook on the economy reduces demand for gold, pulling down prices. Spot gold was trading at $2,632 as of 05:35 a.m. EST on Tuesday.
While gold prices declined on Monday, stock indexes jumped. The small-cap
Russell 2000 index was the biggest gainer, rising by 1.47 percent to hit its highest level ever. The index peaked at 2466, beating the previous high of 2458 in November 2021.
The
Dow Jones rose by nearly 1 percent while the S&P 500 registered a
gain of 0.30 percent.
Factors that helped bring down gold prices—potentially reduced conflict in the Middle East and the appointment of Bessent—acted as drivers for the stock rally on Monday.
Gold Price Predictions
According to a Nov. 26
update from ING Bank, while the potential deescalation of the Middle East conflict is bearish for precious metals such as gold, “other factors including Russia–Ukraine tensions and Fed rate cuts remain supportive for the yellow metal.”
JP Morgan said in a Nov. 18
report that it sees “a strong case for a continued gold rush” next year as well as new highs this year.
“The commodity can play an important role in building resilient portfolios. We expect that gold prices will find continued support from central banks, particularly in emerging markets, which have been buying 1,500 tons more gold per year than their pace before Russia invaded Ukraine,” the report states.
JP Morgan said that China’s central bank only has 5 percent of its reserves in gold compared to the Federal Reserve at 73 percent.
The investment bank also noted that the U.S. dollar is “structurally overvalued.” As such, investors could see gold as a way to diversify currency portfolios, which would support gold prices.
A recent World Gold Council (WGC)
report revealed that total gold demand rose by 5 percent year over year in quarter three to 1,313 tons, which it claimed was a record for a third quarter. For the first time, total demand for the quarter was more than $100 billion, suggesting strong interest in the precious metal.
Gold exchange-traded funds also registered the first positive quarter in quarter three this year since the first quarter of 2022. Louise Street, senior markets analyst at the WGC, said she expects the investment flows in gold to continue.
“On the other hand, we’ve seen over 30 record price highs in 2024, and that environment will continue to be challenging for consumers. However, the prospect of economic growth is another factor we will be watching that could tip the scales,” she said.
