The tension in the Middle East cools down, and the price of gold hit the biggest drop in four years, Wall Street is still optimistic about future market performance

Zhitong Finance learned that gold futures contracts in recent months showed the biggest one-day decline since November 2020 on Monday due to news that Israel and Hezbollah in Lebanon may reach a cease-fire agreement further weakening safe-haven demand for gold, and Trump's selection of Scott Bessent (Scott Bessent) as the new US Treasury Secretary.

Comex's gold futures closed down 3.4% in recent months to $2616.80 per ounce. This is the biggest one-day decline in the US dollar since November 9, 2020, and the biggest one-day percentage decline since June 17, 2021; this move ended the upward trend for five consecutive trading days, but the price of gold has risen 27% so far this year. Comex's silver futures closed down 3.5% to $30.210 per ounce in recent months, the lowest settlement price since September 12.

Israeli and US officials said that Israel's security cabinet will vote on a cease-fire agreement on Tuesday, and the cabinet is expected to approve the agreement. According to reports, the agreement at the negotiation table includes a 60-day implementation period to allow Israeli forces to withdraw; an international committee and UN peacekeepers will monitor compliance.

Mizuho analyst Robert Yawger wrote, “Scott Bessent's appointment has also led to a drop in the price of gold... Compared to some of the other candidates nominated as finance minister, he is likely to be a stable rock, and Bezent is also likely to ease some of Trump's wish lists, such as tariffs.”

StoneX analyst Fawad Razaqzada said that between falling safe-haven demand and hawkish repricing in anticipation of US interest rate cuts, the short-term outlook for gold has turned moderately bearish. Even so, in the longer term, the price of gold is likely to rise to $3,000 per ounce, Razaqzada wrote.

Goldman Sachs analyst Daan Struyven's team also pointed out in a research report called “Stay Selective, Hedge the Tails” released on the 17th that gold is the “Top Trade” choice for dealing with inflation and geopolitics, and the price of gold is expected to rise to 3,000 US dollars/ounce by the end of 2025. The structural driver driving the rise in gold prices comes from central bank demand, the cyclical driver comes from the Federal Reserve's interest rate cuts, and the main downside risks are rising interest rates and the strengthening of the US dollar.

At the same time, the Morgan Stanley Fund also published an article stating that there is room for gold to rise again after this round of adjustments. If Trump's relevant policies are actually implemented next year, there is a possibility that the US will experience a second round of inflation or stagflation. Both of these situations will support the continued upward trend in gold prices. His series of policy slogans, including global tariffs, tax cuts within the US, and the expulsion of immigrants, may make it difficult for US inflation to fall. At the same time, concerns about weakening US dollar credit have not been resolved over the long term. Therefore, I am still optimistic about the room for gold to rise in the future.

Furthermore, UBS Group expects the price of gold to rise to 2,900 US dollars per ounce by the end of next year. UBS analysts, including Levi Spry and Lachlan Shaw, said in a report that due to the strengthening of the US dollar and concerns that more US fiscal stimulus may lead to higher interest rates, there may be a period of consolidation before precious metals begin to rise again.