(Kitco News) - The gold market may be preparing to end the year on a soft note, on pace to close out December with a loss for the first time in seven years. However, there is still a significant amount of optimism in the marketplace ahead of the new year.
In a recent interview with Kitco News, Chantelle Schieven, Head of Research at Capitalight Research, said that despite the current weakness in the market, gold continues to hold its own in a difficult environment. She noted that gold’s selloff since its October highs and the ensuing consolidation is the first major correction the precious metal has seen all year.
“I am not at all concerned with the volatility we are seeing,” she said. “I think this breather is healthy for the market.”
Schieven added that even with this disappointing price action heading into the new year, investors should not forget what was accomplished in 2024.
The precious metal saw an unprecedented run, hitting record highs roughly 40 times this year. At its peak in October, gold was up more than 30% for the year, marking its best performance since 1979.
At the start of 2024, Schieven was the most bullish analyst among those surveyed by the London Bullion Market Association in its annual forecast. She predicted that gold would hit $2,400 an ounce this year, a level it surpassed by nearly $400. Looking ahead, Schieven said she thinks gold still has a lot more room to run.
“I am still as bullish on gold for 2025 as I was for 2024,” she said.
However, Schieven added that her bullish sentiment is tempered with patience, as she expects the current consolidation phase to last for a few months. She said she sees gold prices trading between $2,500 and $2,700 in the first half of the year, but expects gold prices to surpass $3,000 an ounce in the second half of 2025.
Schieven said she expects gold to struggle as investors continue to focus on the U.S. economy’s resilient strength. She explained that proposed policies from President-elect Donald Trump should support economic growth in the first half of the year; however, she expects to see problems creep back into the market.
Since winning the November presidential election, Trump has said he wants to extend his 2017 tax credits. He has threatened to place tariffs on China, Canada, Mexico, and the European Union. He has also proposed rounding up and deporting millions of illegal immigrants and, most recently, expressed a desire to annex Canada and Greenland.
Schieven said that policies like import tariffs and extended tax cuts will provide some support to the economy, driving bond yields and the U.S. dollar higher. However, she added that these policies will also come at a cost.
“Everything Trump has proposed doing is inflationary,” she said. “Increasing tariffs and deporting potentially millions of low-wage workers are going to drive prices higher. Tax cuts will add to the growing deficit, which will increase inflationary pressures.”
Schieven said that Trump's proposals also have a political cost, as many see his stance as a negotiation tactic. This uncertainty will continue to support gold’s safe-haven appeal, she added.
“Right now, we are in ‘wait-and-see’ mode, trying to figure out what this new administration will actually do,” she said. “The big unknown is just how hard he will push for some of his policies.”
In the second half of the year, Schieven said she expects to see slower economic growth due to a global trade war and geopolitical uncertainty. At the same time, she sees inflation holding above 3%.
“A mild recession with higher inflation should be the perfect environment for gold,” she said.
Despite a projected lackluster start to the year, Schieven recommends that investors be overweight gold in their portfolios. She said there is a strong investment case for gold to represent about 10% of a portfolio. She also added that investors should look at holding 2% of their portfolio in silver.
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