(Bloomberg) — Gold (GC=F) tumbled after surging by the most in 20 months last week, with traders ignoring a softer US dollar and shifting their attention to the Federal Reserve’s upcoming interest-rate decision.

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Bullion fell by almost 2% to drop back below $2,700 an ounce, despite a slide in the US currency, which typically aids the commodity. Investors are now focused on the outlook for monetary policy, after a report showed US business activity expanding at the fastest pace since April 2022. Swaps traders see a less-than-even chance the central bank will cuts rates next month. Higher borrowing costs tend to weigh on gold, as it doesn’t pay interest.

The precious metal is still up by more than a quarter this year, supported by central bank purchases and the Fed’s pivot to rate cuts. Haven buying has also been a feature, with prices rallying 6% last week, on an escalation in the Russia-Ukraine war. Most banks remain positive about the outlook, with Goldman Sachs Group Inc. and UBS Group AG seeing further gains in 2025.

“Prices continue to reflect the interplay between geopolitical risks and a less dovish outlook from the Federal Reserve,” said Jun Rong Yeap, a market strategist with IG Asia Pte. “Any upside inflation surprises could further sway bets towards a potential rate hold in December, with any prospects of a slower pace of rate cuts likely to offer some resistance for gold prices.”

A slew of of data this week may yield clues on the Fed’s likely rate path. These include minutes of the central bank’s November meeting, consumer confidence and personal consumption expenditure data — the monetary authority’s preferred gauge of inflation.

The drop in the dollar on Monday — which was accompanied by a decline in US bond yields — came after US President-elect Donald Trump nominated Scott Bessent to oversee the Treasury. Investors expect the hedge fund manager to prioritize economic and market stability over more radical measures.

Spot gold retreated 1.6% to $2,673.94 an ounce as of 12:02 p.m. in Singapore, dropping along with silver (SI=F), platinum (PL=F) and palladium (PA=F). The Bloomberg Dollar Spot Index declined 0.5%.

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