Investors hoping to see a 'Christmas rebound' in gold should remain cautious, as the recent volatility in gold prices may indicate that gold has already reached its price peak for the year.
In the latest report, Ole Hansen, head of commodity strategy at Saxo Bank, pointed out that gold prices have recorded steady growth in December over the past seven years.
Although the recent pullback in gold may attract some to bottom-fish in the last month of 2024, Hansen stated that gold is at a high price level, which remains a risk.
He wrote in the report: 'The biggest headwind remains that gold has already risen strongly by about 28%, bringing its gains close to 29.6% in 2010 and 31% in 2007. Although the fundamental support outlook entering 2025 has not changed, such a large gain could trigger profit-taking and liquidations before the year-end.'
Although gold may struggle to reach new highs in December, Hansen remains optimistic about 2025, predicting that gold prices will reach $3000 in the new year. He also added that geopolitical uncertainty will continue to support gold prices.
He said: 'Next year, tariffs on imported goods in the U.S. are widely seen as a positive for the dollar; however, the impact of a stronger dollar can ripple through the global economy, especially for countries reliant on U.S. Treasuries, commodity trade, and export-driven growth, which may continue to provide support for alternative investments like gold and silver. Trump's radical plans regarding tariffs, tax cuts, and the expulsion of illegal immigrants highlight the risks that inflation and debt may exceed expectations—two factors for which gold investors seek protection.'
Hansen also noted that gold should benefit from further central bank purchases and the support of the Federal Reserve's loose monetary policy.
Despite facing strong selling pressure, gold managed to hold the critical support level of about $2600 per ounce. In the short term, Hansen indicated that gold remains susceptible to the potential impact of Trump's policies.
Hansen pointed out that when Trump announced the nomination of traditional Wall Street financier Bessent to lead the U.S. Treasury, gold prices began last week's trading with a 3% decline. The market expects Bessent to be a stable and safe helper for the U.S. economy, which reduces the attractiveness of gold as a safe-haven asset.
However, Trump threatens to impose a 25% tariff on Mexico and Canada and a 10% tariff on all products from China. Economists noted that the potential escalation of trade conflicts could push the global economy into recession.
Article reposted from: Jin Shi Data