Gold Price Volatility Intensified
Gold volatility has intensified, and although analysts continue to be optimistic about the upward trend, they have quietly lowered their target prices for next year. Some strategists even bluntly stated that gold prices may have already peaked in the short term.
The gold market has recently continued to show high volatility, mainly affected by geopolitical uncertainties. Analysts' and strategists' views on the prospects of gold are becoming increasingly contradictory, and even when analyzing the same factors, they often draw conflicting conclusions.
One market analyst still believes that the long-term upward trend of gold will continue until 2025. Another analyst believes that gold bulls are showing signs of fatigue, while the prospects for silver are more optimistic.
WisdomTree Research Director: Gold is expected to rise to 2850 in the fourth quarter of next year
Nitesh Shah, the head of commodity and macroeconomic research at WisdomTree, said that the continued expansion of the US debt scale, the Federal Reserve's interest rate reduction cycle, and the replacement of the dollar with gold as foreign exchange reserves will be beneficial to gold.
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Shah pointed out that the proposed policies, including the extension of tax cuts, may bring inflationary pressures. At the same time, lower tax rates will further push up government debt. He believes that although the "America First" policy may provide some support for the dollar at the beginning of the year, this support will be difficult to maintain as government deficits continue to expand. Therefore, he expects the dollar to weaken in 2025, which will become an important force driving the rise in gold prices.
"Debt is likely to increase, which will put pressure on the dollar."
At the same time, Shah believes that the Federal Reserve's easing cycle should push down bond yields, which will also become another favorable factor supporting the rise in gold prices. He wrote in his latest research report, "Now we are back in the interest rate reduction environment, bond yields are falling, and investors are regaining interest in gold." Although he expects bond yields to fall, Shah believes that the scope for the Federal Reserve to reduce interest rates next year is limited, and he currently expects interest rates to bottom out between 3.25% and 3.50%.
Although Shah is bullish on gold, he also believes that there is indeed an upper limit to the rise in gold prices next year. He expects that by the fourth quarter of next year, gold prices will remain around $2,850 per ounce. "This is still a very positive situation for gold," he said,
"At first, I predicted that gold prices might reach $3,000, but according to my latest model analysis, this requires a significant decline in bond yields from the current level."
In addition to US monetary policy, Shah also believes that the trend of de-dollarization in the global financial market will continue to support gold prices. Although central banks' gold purchases may slow down compared to recent years, Shah still expects central banks to continue increasing their gold reserves. Shah said that Chinese buyers may re-enter the gold market.
"It's not a question of 'whether', but 'when'. Frankly, I think they can't wait for lower prices anymore, because they may never wait... Compared with other foreign exchange assets, China's gold reserves are still relatively low. If they don't want to be constrained by other G7 economies, they need to increase their reserves."
Additionally, Shah added that against the backdrop of increasing global uncertainty, gold will continue to be an important safe-haven asset.
TD Securities strategist: Gold bulls show signs of fatigue, silver prospects more optimistic
Daniel Ghali, a senior commodity strategist at TD Securities, has a completely different attitude towards the prospects of gold. He said that the signs of fatigue in gold bulls indicate that gold prices may have reached the top in the short term, while silver has more advantages in further rising.
In a research report, Ghali pointed out that the recent decline in gold prices, especially the selling caused by macro funds reducing their positions significantly, is highly consistent with the historical pattern of macro funds retreating from extreme position levels in the past decade, with an average retreat of 7% to 10%.
"However, the strong price performance since then is not very typical, accompanied by a decline in open interest in gold on the New York Mercantile Exchange," Ghali said. "After considering EFP (Exchange for Physicals, the exchange of futures contracts with spot physicals), there are almost no directional fund managers holding short positions, while Western and Chinese gold ETFs continue to reduce holdings, and the trading behavior of Shanghai traders has changed significantly in recent weeks."
Additionally, Ghali added that from a macro perspective, the Federal Reserve's interest rate reduction path has been greatly discounted and is no longer likely to lead to an "overly loose" monetary policy stance, so the interest of macro funds in gold is also unlikely to return to extreme levels.
"The gold price trend has finally become strong enough to force CTA (Commodity Trading Advisors) to re-enter the 'maximum long' position, which means that all the trend signals we monitor have pointed to long positions, but this will in turn limit subsequent algorithmic buying activities... At the same time, the 'TINA (There Is No Alternative)' trade in the Chinese market is still reversing, indicating that Asian demand will not turn the tide." Ghali believes that silver's liquidity allocation is more advantageous.