Correction after strong increase
After a 12-month rally that peaked at $2,802 an ounce on Oct. 30, gold futures have fallen nearly 10 percent in just 13 trading sessions.
Gold futures hit a low of $2,541 an ounce on November 14, a healthy correction after gold rose 54% in a year without any corrections greater than 5%.
Gold is currently consolidating in a symmetrical triangle pattern, hovering around the 18-week moving average support at $2,640 an ounce. A break above the $2,750 resistance level could see gold move towards a target of $3,000 an ounce, which would represent the top of a 13-year cup-and-handle pattern. Conversely, a drop below $2,600 an ounce could see gold test the 200-day moving average at $2,450 an ounce.
Global geopolitical and economic turmoil
Geopolitical factors continue to play a key role in supporting gold prices. In Europe, uncertainty is rising as the French government collapses, and Germany - the region's leading economy - is also facing difficulties.
In the Middle East, although Israel and Palestine have agreed to a ceasefire, according to David Erfle - an investor in the mining sector, comments on Kitco that tensions have not subsided as both sides continue to violate the ceasefire.
Meanwhile, rumors that the US might provide nuclear weapons to Ukraine also appeared and spread quickly. Although on December 1, Reuters reported that White House National Security Advisor Jake Sullivan said that the US was not considering returning to Ukraine the nuclear weapons it gave up after the collapse of the Soviet Union. However, the rumor also added to the market's instability.
Central banks hoard gold
Central banks around the world continue to buy gold to protect against external shocks. According to the latest report from the World Gold Council (WGC), central banks bought a net 60 tonnes of gold in October - the highest amount in 2024. In particular, Eastern European countries have emerged as the largest buyers of gold, surpassing China.
Russia's exclusion from the SWIFT system in 2022 also prompted BRICS to increase gold purchases, while reducing dependence on the US dollar.
Gold outlook for the end of the year
Despite the volatility of the US dollar, the gold market is expected to benefit from the economic policies of US President-elect Donald Trump. His pledges to impose high import tariffs on countries such as Canada, Mexico, and China have raised concerns about trade wars and the possibility of a global economic recession.
Meanwhile, the US unemployment rate rose to 4.2% and inflationary pressures remained high, forcing the US Federal Reserve (FED) to cut interest rates by another 25 basis points at its final meeting of the year on December 18.
Against a backdrop of falling interest rates, heightened geopolitical tensions and economic uncertainty, the long-term outlook for gold remains positive. Holding above key support levels would set the stage for a new rally towards $3,000 by 2025.
