Gold prices experienced a significant rebound, rising over 1% to surpass $2,597 an ounce, after enduring their worst weekly drop since 2021. The rally came as the US dollar eased and traders adjusted their expectations for Federal Reserve rate cuts, particularly in light of Donald Trump’s return to the White House next year.

Bullion’s recent performance marks a sharp contrast to its more than 4% loss last week. While Trump’s victory has raised concerns about inflationary policies that could limit the Fed’s ability to reduce rates, nearly half of swaps traders still predict a rate cut next month, prior to his inauguration. This sentiment benefits gold, which does not yield interest and tends to flourish in a lower-rate environment.

Goldman Sachs Group Inc. added to the bullish outlook, reaffirming its forecast for gold prices to climb to $3,000 an ounce next year. The bank highlighted gold as a top commodity pick for 2025, citing the anticipated rate cuts, continued central bank buying of gold, and Trump’s presidency as key factors. Analysts are advising investors to “go for gold” in the face of these market shifts.

Gold has retreated approximately 7% from a record high reached last month, with losses accelerating following Trump’s victory and the subsequent surge in the US dollar to a two-year high. This has led hedge funds to scale back their bullish positions on the precious metal, with Commodity Futures Trading Commission data revealing the lowest levels of bullish bets in over three months.

Despite recent volatility, Charu Chanana, a strategist at Saxo Capital Markets Pte, emphasized that gold’s fundamental drivers remain intact. “The dollar’s recent rally has paused,” she said. Geopolitical factors, such as North Korea’s potential involvement in the Russia-Ukraine war, may also be spurring demand for gold as a safe haven asset.

As several Federal Reserve policymakers prepare to speak this week, there is a growing openness to further easing. Fed Bank of Chicago’s Austan Goolsbee noted that as long as inflation trends toward the central bank’s 2% target, interest rates could fall significantly over the next 12 to 18 months. Meanwhile, Fed Bank of Boston President Susan Collins reiterated that a rate reduction remains a possibility in December.

Spot gold was trading at $2,589.34 an ounce at 11:23 a.m. in Singapore, up 1% from the previous day. The Bloomberg Dollar Spot Index eased 0.1%, continuing its downward movement for the second consecutive day. Silver, platinum, and palladium also posted gains, adding to the positive sentiment surrounding precious metals.