- The current volatility of gold prices suggests that the market has reached a short-term peak, as investors begin to realize profits and reduce their exposure before the end of the year.
- The market is focusing on President-elect Donald Trump’s nominations for key positions in the government administration due to their importance for the US economy, and therefore the direction of the USD rate and the profitability of treasury bonds.
- Traders are wondering whether gold will achieve its eighth consecutive “Santa rally” in December.
A survey conducted among Saxo investors in the fourth quarter of 2024 showed their dwindling confidence in global markets. This was influenced by, among other things, growing concerns about inflation, interest rates, and geopolitical risks. Ole Hansen, Saxo’s Director of Commodity Market Strategy, highlights the significance of these factors in forecasts for gold and silver.
Gold price volatility, including the recent 3.5% drop on Monday after the strongest rise in 20 months last week, indicates a possible short-term peak in the market. Traders’ beliefs are waning, particularly in the face of the approaching year-end, prompting them to realize profits and reduce their exposure to the precious metal. However, given the challenging macroeconomic and geopolitical climate, prospects for further growth next year are probable. Donald Trump’s radical plans for tariffs, tax cuts, and deportations highlight the risk that both inflation and debt could surprise with increases – this is what gold investors want to safeguard against.
The market is currently focused on President-elect Donald Trump’s nominations for key positions in his government administration due to their importance for the US economy and, consequently, the direction of the USD exchange rate and the yield on treasury bonds. The volatility of gold prices and other commodities this week was associated with these appointments. On Monday, prices fell after Trump announced the choice of Scott Bessent as Treasury Secretary, which is perceived as one of the safest decisions.
The market’s calm was disrupted again when Trump threatened to impose a 25% tariff on Canada and Mexico from his administration’s first day in January, and also announced an additional 10% tariff on all goods from China. The President-elect then nominated Jamieson Greer as the U.S. Trade Representative. Greer, who sees China as a “generational challenge” for the United States and has advocated for a strategic separation from that country, will now manage the implementation of Trump’s tariff plans.
Gold prices have become increasingly volatile, culminating in a correction of 253 USD after reaching a record of 2,658 USD per ounce on October 31st. Support came after a 0.5% price correction from the period from June to October. It’s a relatively small correction, given the levels gold had achieved earlier this year. In the coming weeks, we can expect investors to use the rally to reduce their long positions before the year-end. Our forecast remains that in 2025, gold could reach the 3,000 USD level.
Will Gold and Silver Experience Another “Santa Rally”?
This headline appeared in an article written a year ago in response to data indicating that both gold and silver had strong increases in December in the preceding six years. As it turned out, silver fell short, while gold recorded a modest rise of 1.3%, ending 2023 at 2,062 USD. Considering the current situation, the key question is, can we witness the eighth consecutive increase in the final month of this year? After the recent correction, the chances of repeating this scenario have increased as investors and traders no longer have to pay a record price for gold exposure. However, the biggest challenge remains the current strong rise in gold prices by 28.3% this year, bringing them close to increases of 29.6% in 2010 and 31% in 2007. While the fundamental forecast for gold in 2025 has not changed, such a rise may prompt profit-taking and position closing before year-end.
Reasons to Sustain Investments in Gold and Silver in 2025
Gold and silver currently record a 26% increase year-on-year (down from 47% in October). Several events have had a positive impact on these metals in the past year. Most of these reflected the imbalance in the world, to which investors respond by buying so-called “dead” assets that do not generate interest or dividends and are associated with storage costs.
The strength of precious metals this year is all the more impressive, given the complete lack of support from the US dollar, which has increased by 5.5% year-on-year against a basket of major currencies. The introduction of import tariffs to the US next year is generally seen as beneficial for the dollar. However, the indirect effects of a stronger USD can impact the global economy, particularly hurting countries dependent on dollar-denominated debt, commodity trade, and export-led growth, which may provide further support for alternative investments like gold and silver.
The factors behind our positive forecast for investment metals in 2025 are numerous, and the most important of them are:
- Central bank purchases to diversify reserves beyond the US dollar and treasury bonds.
- Interest rate cuts, which reduce the “cost” of owning gold compared to investing in safe short-term treasury bonds.
- Demand for safe assets in the face of a divided world with ongoing conflicts in the Middle East and Russia and Ukraine, and the risk of trade wars and tariffs, which could increase inflation in 2025.
- Chinese investors’ interest in gold in the face of record-low savings returns and real estate market problems.
- Fiscal instability concerns when governments worldwide are ramping up debt burdens, especially in the US, where President-elect Trump is implementing his revolutionary and costly policies.
Silver Seeks Support Below 30 USD
The strong rise in silver, which reached a 12-year high in October, proved unsustainable, leading to a significant correction. Waning support from gold, copper, and the dollar has got many recent long positions above 32.30 USD struggling with losses. Support has now been found twice around the 29,70 USD level, which represents a 0.618 Fibonacci retracement from the August to October period, with additional support below on the trend line delineated by the February low.
Source: https://ceo.com.pl/zmienny-rynek-zlota-liczy-na-wsparcie-swietego-mikolaja-99620
