Gold has experienced a consistent upward trajectory for much of 2024, leading to fears of a significant downturn due to excessive buying activity by late October.
The actual catalyst for this decline emerged in early November when Donald Trump won the presidential election. His re-election sparked a notable surge in assets such as stocks and cryptocurrencies while propelling the dollar upward; however, it also triggered a decline in various commodities, including gold and silver.
By Friday, November 15, the price of the yellow metal had dropped by approximately 8.3% from its recent peak close to $2,800, trading at $2,565 at the time of writing.
This shift reversed the situation seen in late October, pushing gold into oversold territory. In fact, the last occurrence of such conditions for the world’s largest commodity was recorded in October 2023.
Gold historical charts provide insights into future movements
If the precious metal’s trajectory mirrors past trends, a potential rally of up to 20% could occur by February. This would propel gold’s value toward approximately $3,000 by February 2025, aligning with forecasts from various analysts made since late 2023.
Another aspect of gold’s historical behavior indicating a potential rally beginning in 2025 is the metal’s reaction following Donald Trump’s first election win in 2016.
Eight years ago, the yellow metal plummeted after the election results were announced but reversed course to begin a strong ascent by early 2017. A notable difference in this scenario is that in 2016, gold had been in a downward trend since August, while in 2024, the decline commenced only in November, suggesting that while history may offer parallels, it does not repeat.
Reasons why gold may be poised for a rally after recent downturn
A more definitive indication of gold’s forthcoming movements comes from the recent price developments and insights from Mike McGlone, senior commodity strategist at Bloomberg.
McGlone estimated that reclaiming the $2,600 mark could lead to another rally attempt toward the $3,000 threshold. It’s noteworthy that he was among the initial experts to anticipate this price level being reached by late 2024 or early 2025.
Conversely, he cautioned that if prices continue to fall below $2,400, it could necessitate a re-examination of the critical $2,000 support level. Nonetheless, gold’s performance over the past 24 hours saw a slight recovery, allowing the metal to regain approximately $20 and move toward the $2,600 level.
Looking further down the line, it is likely that gold will renew its rally by early 2025 at the latest. The recent downturn has been largely attributed to stock market optimism linked to the anticipated Republican administration and a perceived reduction in geopolitical tensions following Trump’s victory.
Despite this, a significant decrease in aggressive posturing seems unlikely, considering Trump’s first presidency was marked by a trade conflict with China, fervent support for Israeli policies, and heightened tensions with Iran.
Finally, the latest U.S. Consumer Price Index report indicating a rise in inflation suggests that investors may once again turn to the world’s most recognized safe-haven asset.
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