(Kitco News) – Investors hoping for a Santa Claus rally in gold should exercise caution as recent volatility could signal a price peak, at least for this year, according to one market analyst.
In his latest report, Ole Hansen, Head of Commodity Strategy at Saxo Bank, noted that gold has recorded solid gains in December for the past seven consecutive years.
Although gold’s recent correction could attract some bargain hunting in the final month of 2024, Hansen said the metal’s elevated price remains a risk.
“The biggest headwind remains gold’s already strong 28.3% gain for the year, leaving it close to the 29.6% in 2010 and 31% in 2007. While the fundamentally supportive outlook into 2025 has not changed, a gain of this magnitude may attract profit-taking and position squaring ahead of year-end,” he said in the note.
While gold may struggle to hit new highs in December, Hansen said he remains bullish for 2025, forecasting prices to reach $3,000 in the new year. He added that geopolitical uncertainty should continue to support the precious metal.
“The introduction of trade tariffs on U.S. imports next year is generally seen as USD-positive; however, the knock-on effects of a stronger USD can ripple through the global economy, particularly harming countries reliant on USD-denominated debt, commodity trade, and export-driven growth, potentially providing continued support for alternative investments such as gold and silver,” he said. “Trump’s radical plans on tariffs, tax cuts, and deportation highlight the risk that inflation and debt may both surprise to the upside—two factors gold investors seek protection from.”
Hansen also noted that gold should benefit from further central bank purchases and the Federal Reserve’s easing monetary policy.
Hansen’s long-term bullish outlook comes as gold has managed to hold critical support at around $2,600 an ounce, despite strong selling pressure. In the near term, Hansen said gold remains vulnerable to President-elect Donald Trump’s potential policies.
Hansen pointed out that gold prices started the week with a 3% drop after Trump announced his intention to nominate Scott Bessent, a traditional Wall Street financier, to lead the U.S. Treasury Department. Markets expect Bessent to be a steady, safe hand for the U.S. economy, which reduced gold’s appeal as a safe-haven asset.
However, later in the week, Trump threatened to impose 25% tariffs on Mexico and Canada and a 10% tariff on all products from China. Economists have noted that potential trade wars could push the global economy into a recession.
