Gold (XAU/USD) drops sharply on Monday, down 4.50% and trading near $4,330 at the time of writing, after hitting a fresh all-time high at the end of last week. The precious metal is facing strong profit-taking in a thin liquidity environment ahead of the year-end holidays, which is amplifying the corrective move following the sharp rally seen in recent months.

A moderate rebound in the US Dollar (USD) is also adding pressure on Gold, as it makes the metal more expensive for non-US buyers. This recovery in the Greenback comes as some investors adjust their positions before the end of the year, following Gold's exceptional performance in 2025.

Despite the short-term pullback, the broader macroeconomic backdrop remains supportive for the yellow metal. Markets continue to anticipate monetary easing by the Federal Reserve (Fed) next year, with interest rate cuts expected to reduce the opportunity cost of holding non-yielding assets such as Gold.

Political developments in the United States (US), particularly concerns surrounding central bank independence, are also sustaining an environment of uncertainty that tends to favor safe-haven assets.

On the geopolitical front, persistent tensions continue to underpin structural demand for Gold as a safe haven. Recent developments related to Ukraine and China's military activity near Taiwan remind investors that geopolitical risks remain elevated, even if near-term market dynamics currently favor a phase of consolidation.

Against this backdrop, the current correction in Gold appears more like a technical pause following a historic surge rather than a reversal of the broader trend, with macroeconomic and geopolitical factors still arguing for sustained interest in the precious metal over the medium term.

Source: Fxstreet