- Gold declines over $50 on Monday after Axios news reports that Israel and Hezbollah have reached a ceasefire agreement.
- Gold had already fallen after Donald Trump chose Scott Bessent to be his US Secretary of the Treasury.
- Bessent is a seasoned Wall Street professional and is viewed as a safe pick by markets, reducing haven flows to Gold.
- Technically, XAU/USD pulls back after peaking and risks forming a bearish candlestick pattern on a daily close.
Gold (XAU/USD) falls off a cliff during the US session on Monday to trade down almost two and a half percent in the $2,640s, after Axios News reported that according to a US official, Israel and Hezbollah had agreed to a ceasefire.
Gold had already declined substantially after markets breathe a sigh of relief at the appointment of a “safe pair of hands” to take over from Janet Yellen as the next US Treasury Secretary.
President-elect Donald Trump has chosen hedge fund manager Scott Bessent to be in charge of the US Treasury when he becomes President in January 2025. Gold is losing ground because of Bessent’s reputation as a cautious operator who is likely to curb some of President Trump’s more radical economic and trade policies. This has likely calmed markets and reduced safe-haven demand for the precious metal.
Gold falls on Bessent appointment
Gold is traded lower on Monday after President-elect Donald Trump announced Wall Street tycoon and founder of Key Square Group – a global macro investment firm – Scott Bessent as the US’s new Treasury Secretary.
Although Bessent supports the thrust of Trump’s protectionist and tax-cutting policy agenda, markets expect him to probably soften the blow from Trump’s tariffs and counterbalance inflation by reducing government spending. Based on his prior comments, the two things Bessent is passionate about are cutting the US’s debt pile and thwarting competition from China.
“This election cycle is the last chance for the United States to get out from under a mountain of debt without becoming some kind of European-style socialist democracy,” Vijesti News quoted Bessent as telling Bloomberg in August.
Bessent has advocated a “three-threes” policy in which he will try to reduce the US Budget Deficit to 3% of annual Gross Domestic Product (GDP) from a current estimated 6% in 2024, achieve a 3% annual GDP growth rate, and raise US Crude Oil production by 3 million barrels-a-day, according to Bloomberg News.
Technical Analysis: XAU/USD pulls back down to 50-day SMA
Gold pulls back down to below the (red) 50-day Simple Moving Average (SMA) at around $2,671 on an intraday basis on Monday after peaking at $2,721 in early trade. The steep drop will probably form a Bearish Engulfing candlestick as it looks set to close at or below the level of the 50 SMA.
If the pattern is confirmed and is then followed by a bearish candle tomorrow (Tuesday), this would signal a short-term reversal and more downside ahead.
XAU/USD Daily Chart
That said, the (blue) Moving Average Convergence Divergence (MACD) indicator crossed above its red signal line recently, providing a bullish “buy” signal and suggesting more upside on the cards for the price.
The precious metal’s trend is also bullish, and given the maxim that “the trend is your friend,” the odds still favor a continuation higher.
A break above $2,721 would be a bullish sign and give the green light to a continuation higher. The next target would be at $2,790, matching the previous record high.
