SINGAPORE – Gold is heading for the biggest weekly drop since May as investors anticipate higher US interest rates, and progress on tax reform buoys the dollar.

Metal for immediate delivery has slumped 2.5 percent this week, the most since the five days ended May 5. It traded at $1 248.72 an ounce at 9:32 a.m. in Singapore, near the lowest level since July, according to Bloomberg generic pricing, paring this year’s gain to 8.8%. The Bloomberg Dollar Spot Index is poised for its biggest weekly gain in a year.

While bullion is still heading for the first back-to-back annual advance since 2012, investors are less sold on precious metals as stock markets hit record highs and the Federal Reserve continues tightening monetary policy and starts reducing its balance sheet. The policy-setting Federal Open Market Committee is widely expected to raise borrowing costs at its meeting on December 12 to 13, which would be the third hike this year, further curbing the appeal for non-interest bearing bullion.

“Gold’s role as a safe haven and a store of value is greatly diminished at this point,” said Barnabas Gan, an economist at Oversea-Chinese Banking Corp. in Singapore. “Market-watchers are likely positioning for an FOMC rate hike next week. The improvement in risk appetite considering the postponing of the US partial government shutdown and further progress in Brexit talks should buoy market sentiment into the next week.”

Congress passed a two-week extension of federal funding that averts a government shutdown this week. Investors are also optimistic after the passage of the US tax bill through the Senate, with House and Senate Republicans now working on compromise legislation to be sent to President Donald Trump by the end of the year.

In the UK, premier Theresa May is preparing another proposal to solve border issues with Ireland, as she races to meet a European Union deadline for progressing Brexit talks.