(Kitco News) - I believe the majority of my valued Kitco readers are longer-term investors in precious metals--more of the “buy and hold” types as opposed to the more active futures traders of precious metals. There’s nothing wrong with more active trading or even day-trading. In fact, if I had to categorize my trading style it would be as a more active trader.
For the more active trader, he or she much of the time must deal with the “market noise” that I have written about in my weekly Front Burner email reports. That is, the day-to-day price and market fluctuations that can unpleasantly whipsaw active traders. That’s where the gold market is at present: choppy and sideways, and most recently selling off.
As 2024 winds down and the new year gets under way, I look for more of the same sideways grind in the gold market—barring an unexpected major geopolitical development that could quickly produce keen safe-haven demand for gold and silver.
In late January U.S. President-elect Donald Trump takes office. It’s likely that the recent choppy trading in gold is at least partly due to traders waiting to see what political and economic actions Trump takes in his first few weeks in office. This includes his relations with China and the European Union, specifically regarding Trump’s threatened trade tariffs.
My bias is that Trump won’t be as heavy-handed with other countries as many think. In interviews and speeches since being elected, Trump has already shown a bit more conciliatory tone. If my bias is correct, a less-harsh Trump would be price-friendly for precious metals markets. Reason: Better economic relations between the U.S. and its world trading partners mean likely better global economic growth, including more demand for metals.
From a longer-term perspective and for the longer-term gold investors, the technical posture for gold remains firmly bullish. The weekly and monthly continuation charts for nearby gold futures remain in solid price uptrends, with no longer-term chart clues that major market tops are in place or close at hand in the coming weeks, months or even longer. There’s very little doubt in my mind that in the coming few years, or sooner, gold prices will push above $3,000 an ounce—and maybe well above.
Importantly, most raw commodity markets are highly cyclical, meaning they go through periods of boom and bust. Those periods can last a few months up to several years. The gold market is presently still in a boom cycle, albeit a mature one. This boom cycle started in 2022. The last significant longer-term bust cycle for gold occurred from 2011 to 2015.
I want to show you monthly continuation charts for nearby lumber and cocoa futures for perspective. Lumber is a good example of the cyclical price nature of raw commodity markets. From the early 1970s up until 2020, the lumber market had very cyclical and even somewhat uniform boom and bust periods. Then in 2021 lumber did a moonshot as prices nearly tripled in a few months’ time. The same thing happened to the cocoa futures market just recently. It cannot be ruled out that gold prices, in the coming few years, or sooner, could do the same thing as lumber and cocoa prices have done—meaning exploding way above what were their historical highs.
I want to take this opportunity to thank my valued Kitco readers for reading my stuff for the past 15 years. I enjoy writing it for you and want to wish you all the happiest holiday season.—Jim (jim@jimwyckoff.com)
