While gold will likely remain in demand in the new year, the massive run from last year will be hard to repeat. “We forecast firm prices but as gold enters a new paradigm, reduced physical demand and higher supply may curb rallies,” HSBC chief precious metals analyst James Steel wrote in a report last week. The precious metal, historically viewed as a hedge against inflation whenever prices have risen, notched double digit percentage gains in each of the past two years. In 2024, bullion advanced jumped 28%, outpacing the S & P 500’s 23% gain. In fact, gold’s performance in 2024 was its sixth-best annual gain in the last 50 years, according to LPL Financial chief technical strategist Adam Turnquist. HSBC’s Steel said a firmer U.S. dollar will make it more difficult for gold to continue to run. The dollar index ( DXY ) recently topped 110 for the first time since Nov. 2022 and is likely to remain strong so long as the outlook for further interest rate cuts from the Federal Reserve stays cloudy and the U.S. outperforms G-10 peers, Steel said. The dollar index, which measures the greenback against a basket of global currencies, advanced nearly 7% in 2024 . “With the dollar breaking out of this multi-year range, there’s some upside risk there that could put some pressure on gold (but) not enough to derail the longer term uptrend, though,” Turnquist told CNBC in an interview. The bull case for gold rests in part on the two-year rally its enjoyed, with historical precedent suggesting that the precious metal could run further, Turnquist says. The LPL technical analysts, who studies price charts, noted that when bullion advances 15% or more annually, the following year sees gold return an average 16.2%, rising 71% of the time. GLD 1Y mountain SPDR Gold Trust ETF over the past year. What’s more, strong demand for physical bullion from global central banks and China and elevated geopolitical risks are likely to underpin gold prices, Turnquist said. Deutsche Bank is also more cautious in its outlook for gold in 2025, saying the recent moderation in prices could extend through the second quarter of 2025, when the bank figures President-elect Trump’s domestic policy agenda will clear both chambers of Congress. “In light of such resilient demand we see a risk that the correction is shallower, and that gold recovers earlier than we project. In the second half, we see gold resuming an upward path towards our year-end target of USD 2,900/oz,” analyst Michael Hsueh wrote in a report this month.
