Gold prices tried to rebound in December, but ran into selling, causing further consolidation. Expect increased volatility as Trump charges back into office

• Gold prices are holding up well considering the 27% gain last year. The market is being buffeted by many cross winds and the forecast is for more stormy weather ahead once Trump starts to throw his weight around
• Markets are braced to see how Trump handles the wars, the foreign entities of concern, Nato, trade and climate change
• This is likely to lead to a period of increased price volatility, not only for gold but for other markets. And, gold is likely to react to their moves too
• The fact gold prices have held up well despite multi-month high US treasury yields and multi-year highs in the US dollar, suggest gold is being sought after for its safe-haven properties – this is not surprising given the extent and range of issues the world faces
• The market remains bullish judging by the titles of articles in the media; this might highlight the strong underlying interest in gold, but equally it prompts caution – especially given the high opportunity cost of holding gold at these levels
• Funds and investors reduced exposure to gold in recent months, but that is normal behaviour ahead of year-end

Markets are braced to see how Trump handles the wars, the foreign entities of concern, Nato, trade and climate change

Silver has retreated more than gold has and looks more vulnerable in the short term given sluggish industrial demand

• Market is bullish for silver as it is for gold, but there are some headwinds for silver
• Demand from solar industry likely to soften as China destocks

Market is bullish for silver as it is for gold

PGM prices are back below $950 per oz as manufacturing and the auto market remain weak

• Platinum outlook looks brighter than palladium’s

Gold consolidates in December after an outstanding performance in 2024

After a blistering performance in 2024, that at one stage saw gold prices up 35% on the year, the market consolidated into year-end. Having peaked in October at $2,790.90 per ounce, prices fell back to a low of $2,536.95 per oz in November. They have since been consolidating in a fairly choppy range either side of $2,650 per oz. Given the political, economic and geopolitical uncertainty the world currently faces, it is not surprising prices have consolidated after such a performance. Gold ended the year up $561 per oz, a rise of some 27%, beating the 12.8% rise in the Dow Jones Industrial Average and the 24.9% rise in the Nasdaq.

Uncertainty lies ahead

Ahead of President-elect Donald Trump’s inauguration on January 20, both the US dollar and US 10-year treasury yield have been climbing from strength to strength, with the former reaching 109.50 in early January, up from around 104 just ahead of the US Election, while the 10-year US treasury yield has climbed to 4.57%, up from around 4.3% over the same period. Given their strength it is not surprising gold is not at its high, but that said, given their rise, gold seems to be holding up extremely well. The last time the yield was at this level was in May 2024, when gold prices were trading at $2,325 per oz. The last time the Dollar Index was this high was in November 2022 when gold prices were around $1,750 per oz. This could suggest that gold prices are over-priced, but it is probably more a case of how much gold is sought after as a safe-haven in these troubled and uncertain times.

Consolidating is healthy

After the gains in 2024, it is healthy for the market to consolidate as we know prices rarely go up in straight lines. Periods of consolidation allow buyers and sellers to get accustomed to the new prices, the higher prices will have attracted profit-taking and scrap into the market, both of which will need to be absorbed by buyers.

It is healthy for the market to consolidate as we know prices rarely go up in straight lines

The selling and extra supply that comes into the market at the higher price, combined with the bargain hunting into price pullbacks are the cause for the volatility. Once the extra supply is absorbed and if the buying interest is still there, then the rally is likely to resume – hence the market adage "The trend is your friend".

CHART 1

ETF investors return as buyers

Investors returned as net buyers in December, buying 7.5 tonnes (up to December 27), this after being net sellers of 28.4 tonnes in November. On a tonnage basis, ETF investors were holding about three tonnes less on December 27, than they were at the end of 2023, technically making it the fourth year of year-on-year declines. But, over the year, the trend has changed from being net sellers to net buyers, as the chart shows.

08 Jan 2025 | Categories: Gold, Silver, US, Platinum, Palladium

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