(Bloomberg) -- Gold tumbled on signs of deescalating geopolitical tension in the Middle East.

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Israel is potentially days away from a cease-fire agreement with Lebanon’s Hezbollah, the Israeli ambassador to the US said. Prices extended losses after Axios reported that Israel and Lebanon have accepted the terms of a ceasefire agreement. The parties haven’t yet announced an agreement, it said.

Bullion tumbled as much as 3% as traders unwound positions built last week amid rising geopolitical tensions, which helped the metal register the biggest weekly rally in 20 months.

Traders were also digesting President-elect Donald Trump’s pick of Scott Bessent for Treasury Secretary. It is seen as a measured choice that would inject more stability into the US economy and financial markets. The hedge fund manager’s nomination has eased concerns over the incoming president’s inflationary agenda, which could reduce gold’s allure as a hedge against price rises.

The Bessent news is a possible driver of gold’s price drop on Monday, along with profit taking following last week’s rally, according to UBS Group AG commodity analyst Giovanni Staunovo.

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“Some market participants see him as less negative for a trade war, considering his comments on a phased approach for implementing tariffs,” Staunovo said.

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 Fed will cuts rates next month. Higher borrowing costs tend to weigh on gold, as it doesn’t pay interest.

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.

Gold has still climbed roughly 30% this year, supported by central bank purchases and the Fed’s pivot to rate cuts. Haven buying has also been a feature on an escalation in the Russia-Ukraine war. Most banks remain positive on the outlook, with Goldman Sachs Group Inc. and UBS seeing further gains in 2025.