What’s Next for Gold as Silver Hits New Records?

Precious metals have resumed their upward trend in December amid hopes of more Fed rate cuts and concerns about the longevity of the AI-driven rise in stock valuations.

The Latest Developments

• Gold appears to have resumed its rally, up 60% since the start of the year, and silver has hit a new record high.
• Rising expectations that the Fed will cut rates and keep easing next year under a new, more dovish chair have weighed on the dollar and propped up precious metals.
• High stock valuations have left markets cautiously optimistic, with strong gold hedging as brokers predict gold rising to $4,900 per ounce next year.

Gold, Other Metals and Stocks Rise

Usually, the risk-on sentiment that drives stocks higher reduces demand for safe havens like gold. But the recent parallel growth can be explained by expectations at90% that the Fed will cut rates in December, followed by as much as 100 bps of easing next year. Reportedly, US President Donald Trump is close to announcing his nominee to replace Fed Chair Jerome Powell next year, with all bets on someone significantly more dovish. However, the concurrent rise in safe havens amid high stock valuations (the benchmark S&P 500's PE ratio is over 30, compared to its historic average of 15) suggests that traders are cautiously optimistic. Although analysts have expressed optimism that the tech rally will continue thanks to interest in AI, theyacknowledge rising demand for value stocks as investors look to lock in gains ahead of next year's uncertainty.

Other precious metals have been rising even faster than gold, which could reflect a rotation towards metals like silver after themore than 60% rally in the yellow metal's price this year. Silver scored new record highs driven by high demand as a store of value and industrial buying to support the buildout of photovoltaic capacity. Palladium and platinum, with lower liquidity, have also experienced surges. Meanwhile, "digital gold" (BTC) is fighting to turn positive for the year after falling to April lows in November. The drop could be a sign of market stress, as traders shed more speculative assets and preserve liquidity. Crypto has not been able to capitalise on the weaker dollar, as precious metals have, with analysts suggesting that the recent declines in Bitcoin are helping to fuel the rally in gold and silver as traders look for safety ahead of the long holiday trading period. With BTC now up above the $90k handle, the Santa Rally may have a wider impact on assets.

Can Gold Keep Rising in 2025 and Beyond?

UBS recently raised its bullion price target to $4,500 per ounce by the middle of next year. In a note to clients, Bank of America said that the recent pullback in gold prices during November was a strategic pause before the next leg up. Goldman Sachs predicts the yellow metal will end 2026 at $4,900. Besides the expected Fed easing, analysts point to continued dedollarisation and, in particular, gold as a geopolitical hedge. Indeed, under the current circumstances, it's difficult to make a bearish case for precious metals, barring a major, unforeseen shift in the global economy. However, traders are keeping an eye on Friday’s PCE release and Fed Chair Jerome Powell’s comments next Monday for cues on future policy, as a less dovish interpretation could weigh on the prices of gold.

Gold Leaves Behind Continuation Pattern

Gold might have left behind a pennant or triangle pattern, forming support at the $4k handle and peaking at $4250 for the time being. A bullish continuation from the breakout point near $4160 would open the door to the measured move projection of $4650, with intermediate resistance at the prior record high of $4380. However, the double-top formation just above $4250 poses a risk for the yellow metal, especially when combined with RSI divergence. Further declines back within the continuation pattern under $4135 would expose the $4k support once again, bringing into focus the late-October trough of $3890. Losing that floor would suggest that the correction from record highs is still ongoing.

Source: SpreadEx | Spot Gold, 4-hour Chart