In the latest report, Heraeus experts warned that although gold prices have had impressive developments in the past 18 months, the signs of peaking are clearer.
As prices approach $3,000 an ounce, signs of excessive excitement are becoming increasingly clear, although the foundation is still quite solid, they said.
The positive side is that central bank buying and investors are still supporting gold prices. Central banks are likely to continue hoarding gold this year, possibly at a slower pace than last year.
The People's Bank of China added 5 tons to reserves in January. Capital flows into gold ETFs have remained strong since the beginning of the year, with a total of 34.5 tons, compared to a net withdrawal of 6.8 tons in 2024 - the report said.
However, not all platform factors support gold prices. High gold prices have hampered jewelry demand in many countries, especially in China - the largest market, where demand fell 24% last year, while recycled gold demand increased.
A ceasefire in the Middle East and moves towards peace in Ukraine could reduce safe-haven demand, while uncertainty over US tariffs could still attract cash flow into gold. The flow of metals into the US before the possibility of a new tax is noteworthy, but it is not clear how much is real demand and how much is just an adjustment to storage locations - Heraeus analyzed.
Heraeus has also warned of some technical indicators suggesting gold prices could correct. With 8 consecutive weeks of increase after a 29% increase in 2024, the weekly gold price momentum has surpassed the levels seen in October 2024 and August 2020 - two times before gold decreased by 9% and 19%, respectively. At the same time, there is a phase difference between the Relative Strength Index (RSI) and gold prices across the day and weekly framework, they said.
Gold prices are also trading significantly higher than the long-term moving average. Looking back to the 1970s, the gap between gold prices and the 200-day moving average is rarely as big as it is now. Previous incidents in 1980, 2011 and 2020 have led to a period of explosive growth, followed by a prolonged decline in the market the analysts noted.
Heraeus believes the rally will continue as long as investor cash flow and shelter demand remain strong, but the possibility of an increase is growing. In the short term, $2,800/ounce could play a supporting role, and if adjusted further, prices could fall to $2,450-2,550/ounce, they predict.
The risk of depreciation also comes from speculative investors reducing their buying position. Gold could record its eighth consecutive week of gains, the longest streak of gains since August 2020. However, in recent weeks, net buying positions in the futures market have fallen below 31 million ounces, compared to nearly 33 million ounces in early February, showing some investors are taking profits despite gold prices still rising. This may reflect the view that the rally is gradually coming to an end, the analysts said.
The prospect of peace in Ukraine could also impact safe-haven demand for gold. Current demand for golds shelter is underpinned by global trade tensions and wars in Gaza and Ukraine, Heraeus said, noting that Even if peace in Ukraine and a ceasefire in Gaza are maintained, President Trumps tariff campaign remains a risk factor that could continue to boost shelter demand.
Spot gold prices set a new record of $2,955 an ounce last Thursday. And yesterday morning (Monday, February 24), prices surpassed this level, reaching 2,956.31 USD/ounce just after 9:00 a.m. EST.
