Talking Gold — December 2024
Gold Market Recap: Gold’s Momentum Stalls but Fundementals Remain Strong
Gold experienced significant volatility in November, finishing down -3.40% and ending at $2,651.05/oz. An end to election uncertainty led to a rise in risk assets and a decline in macro volatility hedges.1
Despite the potential inflationary effects of President-Elect Trump’s tariff policies, gold was not immune to the risk-on versus risk-off rotation, trading around a two-month low of $2,536 shortly after election day.2
Gold recovered in the latter half of November, amid heightened geopolitical tensions related to the war between Russia and Ukraine. In fact, in the third week of the month, gold posted its largest weekly gain since March 2023.3 And US gold exchange traded funds (ETFs) saw over $1 billion of inflows in the last 10 trading days of November.4
In the short-term, elevated geopolitical risks and evolving monetary policy may continue to support gold sentiment, even if the broader capital markets strike a risk-on tone.
Gold’s longer-term outlook also remains positive. Central banks are on track to match their 2023 net purchases. Demand from China and India continues to grow. Moreover, with the Federal Reserve’s expected rate cuts, along with the potential for new fiscal policies increasing the federal deficit and worsening the US government’s debt profile, gold will likely become more attractive versus the US dollar or Treasurys (Figure 1).
Gold Performance Drivers
Flows: Global gold ETF holdings decreased by -1.0% in November, an estimated 26.61 metric tons(t). Net speculative positioning in COMEX gold futures ended November at 195,173 contracts, while also exhibiting the highest rolling six-month average since April 2020. This sustained extension of long contracts and elevated ETF demand suggest money managers remain bullish on gold.5
Factors: Gold price consolidation could have been expected in November, given that the 14-Day RSI traded near overbought levels at the start of the month.6 Yet, that was more of a reflection of pre-election uncertainty positioning. The 14-day RSI ended November at around 50, while gold’s spot price bounced off its 100-day average mid-month once an immediate post-election sell-off concluded. Gold finished the month above its 50-, 100-, and 200-day moving averages.
Fundamentals: Total gold demand (including OTC investment) gained 5% y/y to 1,313t — a record for a third quarter. The value of demand jumped 35% y/y to exceed US$100B for the first time.7 And as mentioned earlier, gold ETFs had over $1 billion of inflows over the last 10 trading days of November.8