The gold market has recently continued to exhibit high volatility, mainly influenced by the geopolitical uncertainty brought about by Trump's imminent inauguration. Analysts and strategists' views on the outlook for gold have also become increasingly contradictory, often leading to conflicting conclusions even when analyzing the same factors.

In this article, a market analyst still believes that the long-term upward trend of gold will continue until 2025. Another analyst believes that gold bulls are showing signs of fatigue, while the outlook for silver is more optimistic.

WisdomTree research director: Expected gold price to rise to $2,850 in the fourth quarter of next year.

Nitesh Shah, head of commodity and macroeconomic research at WisdomTree, stated that the continued expansion of U.S. debt, the Fed's rate-cutting cycle, and the replacement of the dollar with gold as foreign exchange reserves will be positive for gold.

Shah pointed out that several policies proposed by Trump, including extending tax cuts, may bring inflationary pressure. Meanwhile, lower tax rates will further increase government debt. He believes that although Trump's 'America First' policy may provide some support for the dollar at the beginning of the year, as the government deficit continues to widen, this support will be difficult to maintain. Therefore, he expects the dollar to weaken by 2025, which will be an important driving force for the rise in gold prices.

"Debt is likely to increase, which will put pressure on the dollar."

Meanwhile, Shah believes that the Fed's easing cycle should push down bond yields, which will also be another positive factor supporting the rise in gold prices. In his latest research report, he wrote, "We are now back in a rate-cutting environment, bond yields are declining, and investors are regaining interest in gold." Although bond yields are expected to fall, Shah believes that the Fed's room for rate cuts next year is limited, and he currently expects rates to bottom out between 3.25% and 3.50%.

Although Shah is bullish on gold, he also believes that there is indeed an upper limit to gold price increases next year. He predicts that by the fourth quarter of next year, gold prices will stabilize around $2,850 per ounce. "This is still quite a positive situation for gold," he said.

"Initially, I predicted that gold prices could reach $3,000, but according to my latest model analysis, this requires bond yields to drop significantly from current levels."

In addition to U.S. monetary policy, Shah also believes that the trend of de-dollarization in global financial markets will continue to support gold prices. Although central bank gold purchases may slow compared to recent years, Shah still expects central banks around the world to continue increasing their gold reserves. Shah stated that Chinese buyers may re-enter the gold market.

"It's not a question of 'if', but 'when'. Frankly, I don't think they can wait for lower prices anymore, because they might never come... Compared to other foreign exchange assets, China's gold reserves are still relatively low. If they don't want to be constrained by the other G7 economies, they need to increase their reserves."

Additionally, Shah added that amidst the growing global uncertainty, gold will continue to be an important safe-haven asset.

TD Securities strategist: Gold bulls are showing signs of fatigue, and the outlook for silver is more optimistic.

TD Securities senior commodity strategist Daniel Ghali holds a completely different attitude towards the outlook for gold. He stated that signs of fatigue among gold bulls indicate that gold prices may have peaked in the short term, while silver has more advantages for further increases.

In a research report, Ghali pointed out that the recent decline in gold prices, particularly due to significant liquidation by macro funds, closely aligns with historical patterns during the past decade when macro funds retreated from extreme positions, with the average magnitude of this retreat being between 7% and 10%.

"However, the strong price performance since then has been rather atypical, accompanied by a decline in open contracts for gold on the New York Mercantile Exchange," Ghali said. "Considering EFP (Exchange for Physicals), there are currently almost no directional fund managers' short positions, while Western and Chinese gold ETFs have continued to reduce their holdings, and the trading behavior of Shanghai traders has changed significantly in recent weeks."

"We now expect buying pressure to soon become exhausted. The safe-haven demand from Russia's ballistic missile launch has been reported to have driven up gold prices, but this support may reverse in the short term."

Additionally, Ghali added that from a macro perspective, the Fed's path of rate cuts has been greatly discounted, and will no longer lead to an 'overly accommodative' monetary policy stance, therefore macro funds' interest in gold is also unlikely to return to extreme levels.

"The trend of gold prices has finally become strong enough to force CTAs (Commodity Trading Advisors) back into a 'maximum long' position, which means that all the trend signals we monitor have pointed to bullish, but this in turn will limit subsequent algorithmic buying activity... Meanwhile, the 'TINA (There Is No Alternative)' trade in the Chinese market is still reversing, indicating that demand in Asia will not change the situation."

In contrast, Ghali believes that the liquidity allocation of silver is clearly more advantageous.

Article reposted from: Jinshi Data