Gold plunges 3% as Trump Treasury pick and potential Israel-Hezbollah truce fuel risk-on mood

Gold prices lost about 3% after President-elect Donald Trump picked Scott Bessent as his Treasury secretary, with reports of Israel and Hezbollah nearing a ceasefire deal also eroding the safe-haven metal's appeal.

Spot prices of the yellow metal dropped 3.44% to $2,616.80 per ounce, according to data from Factset. Gold futures on the New York Mercantile exchange were trading at $2,628.5.

"The ~$100 wipeout in Gold today is as severe in size & pace as the post U.S. election selloff on Nov 6th," MKS Pamp's head of metals strategy, Nicky Shiels said.

A potential Israel-Hezbollah ceasefire agreement and Bessent's appointment were the key contributors to the bullion selloff amid a risk-on sentiment, Shiels added. 

On Monday, Israel's ambassadorto the U.N. Danny Danon announced that Israel was moving toward a ceasefire with Hezbollah, though he stressed that it was "not going to happen overnight" and observed that some issues remain unresolved.

White House national security adviserJohn Kirby had described the discussions on the ceasefire deal as "productive."

"But nothing is done until it's all done, and it's not done right now," he said.

Key U.S. benchmarks rose to new record highs on Monday, with investors seeing Bessent, a hedge fund manager, as someone who will be supportive of the equity market.

A "buying exhaustion" in gold is also contributing to bullion's price reversal, commodity strategist at TD securities Daniel Ghali said, highlighting that the strong physical demand from Asian central banks as well as traders has notably subsided over the past months.

There was heavy Chinese selling overnight at the Shanghai Gold Exchange, Shiels said. 

Gold buying activity is also likely to "remain constrained" by a vastly different