For the third 12 months operating, our forecasts for the value of gold have come true.
In December 2023, we identified that “the common pattern within the worth of gold at this stage of the cycle suggests the potential for a probably high-performance impulsive upward motion (as much as +30% inside 12 months)”.
Over the 12 months 2024, the value of gold has the truth is climbed by nearly 30%… a efficiency unmatched for nearly 15 years!
This forecast is exceptional in a number of respects. On the one hand, only a few banks had anticipated such a surge within the worth of gold. And secondly, forecasting such impulsive actions is usually topic to uncertainty and volatility. But 2024 has confirmed the regularity of gold worth cycles.
The 12 months 2025 is proving simply as strategic. Visibility on the basics of the value of gold stays good. Nonetheless, structural modifications are going down out there, with general funding demand on the rise and the significance of future macroeconomic dynamics. Whereas a pointy fall within the gold worth appears unlikely in 2025, consideration is now centered on the depth of the pattern.
10-year gold worth pattern
After a interval of decline within the early 2010s, the dear steel recorded a +70% rise between January 2017 and January 2021. This robust comeback propelled the gold worth again to its earlier highs of 2011. However this rise within the gold worth peaked in the summertime of 2020, within the midst of the COVID disaster and financial uncertainties.
These 4 years of rise (2016-2020) had been adopted by 4 years of stagnation, regardless of rebounds linked to the return of wars and inflationary tensions. Nonetheless, gold didn’t fall, as bodily demand remained sturdy, whereas mining firms struggled to be worthwhile with a worth durably under $1,700 per ounce. What’s extra, opposite to the expectations of many traders, rising rates of interest didn’t trigger gold to fall!
| Forecast for the 12 months | Deliberate efficiency | Precise efficiency | Variance (precise – forecast) |
| 2022 | +0% | -0,23% | -0,23% |
| 2023 | +10% | +13,08% | +3,08% |
| 2024 | +30% | +27,1% | -3% |
| Common | – | – | -0,01% |
Our forecasts have thus adopted the gold cycle. In 2022, we identified that “if we refer solely to the data that’s offered to us by the modeling of the previous costs, one may think about the gold worth remaining steady, general, between now and the tip of 2022”. Subsequently, 2023 marked a primary turning level. The bearish power capitulated, and the value of gold was in a position to take a look at new highs with out success. Gold’s +10% rise in 2023 prompted a primary change in market psychology. The bull market of 2024 may now start!
With a median forecast error of -0.01% over the past 3 years, the cyclical technique seems to be essentially the most strong, constant and correct foundation on common for predicting, at the very least partially, the future of monetary asset costs. This technique is described in larger element in my ebook “Cycles et Fractales pour investir en bourse” (paperback).
The most important gold worth cycles
The chart under exhibits the anticipated pattern within the worth of gold over 9 years (since 1978). The pink curve signifies our present place inside this 9-year cycle. There’s a important symmetry between the historic gold worth pattern at this level within the cycle and the present pattern. This symmetry explains the accuracy of the +30% rise forecast for the previous 12 months. The earlier cycle (2014-2023) additionally confirmed nice symmetry.
What’s extra, the 16-year cycle reveals related patterns. Gold’s worth evolution since 2010 faithfully reproduces the developments noticed since 1978. In latest months, gold has even barely outperformed its lengthy cycle.
The value of gold is subsequently persevering with on its normal cyclical trajectory, and it’s affordable to imagine that this trajectory shall be broadly adopted in 2025.
What can we count on in 2025?
Since 1970, the value of gold has solely recorded an annual efficiency in extra of +25% on 9 events! In different phrases, the empirical “chance” of gold rising by +25% over a 12 months, independently of any cyclical dynamics, is 16%.
What’s extra, nearly 90% of the years wherein the value of gold rises by greater than +25% are adopted by one other 12 months of will increase. In different phrases, an annual improve of greater than +25% within the worth of gold is usually an indication of momentum, resulting in a extra sustainable uptrend for the next 12 months. The common rise over the next 12 months is +38%, or +25% if we exclude the distinctive rise of 1978. This common efficiency falls to +13% if we disregard the extremely unstable Nineteen Seventies.
This statistical statement leads us to be somewhat optimistic concerning the trajectory of the gold worth in 2025. Nonetheless, this statement contradicts the 9-year and 16-year cycles. The 8/9-year cycle suggests stagnation, or perhaps a fall in gold to ranges between $2,400 and $2,500 an oz (-8.5% at this stage of the cycle). Nonetheless, the 16-year cycle suggests a median rise of round 10% at this degree of the cycle (+8% to +11% particularly). From this normal statement, plainly the chance of a serious downturn is excluded in 2025.
Consequently, it’s attainable that the continuation of bullish momentum may help a rise of round 10%. Such a rise may goal new highs round $2,900, and even $3,000, over the course of the 12 months. Within the reverse case, i.e. a reasonable rebound in inflation, with much less marked price cuts and continued development, the lack of momentum is more likely to result in stagnation.
Main banks see gold worth at $3,000
Most banks, with the notable exception of JP Morgan and some others, missed gold’s sharp comeback in 2023 and 2024. What’s extra, the 12 months 2024 marks important purchaser flows. In actual fact, funding demand greater than doubled within the area of a 12 months! On the similar time, demand from central banks stays at a really excessive degree, though the tempo of gold purchases has moderated.
The return of traders, absent since 2022, additionally exhibits that the rise within the gold worth is sustained. These purchases could also be motivated by hypothesis (ETFs, quick period, and so forth.) or by the seek for safety in a tense geopolitical context, with financial dangers looming in late 2025/early 2026. Thus, main banks reminiscent of Goldman Sachs and JP Morgan anticipate a gold worth of $3,000 in December 2025 (and $38 for silver). Equally, UBS sees gold at $2,900 by December 2025. These forecasts could be consistent with our earlier evaluation.
Lastly, a decisive issue within the rise of the value of gold is the autumn in actual rates of interest. At the beginning of 2024, we identified {that a} fall in actual rates of interest lasts a median of three.6 years (which can be the size of the quick financial cycle). Thus, we identified that “a 20% to 30% rise within the worth of gold would propel the value of the yellow steel to $2,500 and $2,700 per ounce. Equally, a efficiency of 40% over 4 years would set a goal of practically $3,000 an oz for 2027/2028”. In actual fact, falling actual rates of interest are sometimes a key issue within the rise of the gold worth. On common, the value rises by +40% within the three and a half years when rates of interest fall. An increase of +27% in 2024 would subsequently depart a possible of round 10% to finish this motion.
Uncared for mining firms?
In response to knowledge from the World Gold Council, the price of producing an oz of gold has climbed considerably, reaching nearly $1,400 in the summertime of 2024, up 6% year-on-year. This corresponds to a “basic worth” for gold of between $2,100 and $2,250 in June 2024. An additional rise in manufacturing prices within the second half of 2024 may subsequently justify present gold worth ranges.
In different phrases, the price of producing gold is rising quicker than inflation. This means that the adjustment within the worth of gold should be at the very least as nice because the inflation in prices so as to fulfill a nonetheless sustained demand. In the long run, we all know that the gold manufacturing price is the figuring out issue, and accounts for a lot of the everlasting steel’s worth.
Conversely, increased manufacturing prices don’t essentially profit mining firms, as they too face rising prices. What’s extra, the stagnation of the gold worth between 2020 and 2024 has weighed on mining firms’ profitability, whereas their prices have risen.
Threat of technical overheating?
On October 30, 2024, we signaled the chance of a peak within the gold worth because of the file variety of open contracts on the derivatives market. This sign confirmed a peak within the gold market on the identical day, adopted by a correction of virtually 8%, primarily because of the easing of volatility on the markets following the re-election of Donald Trump.
L’intérêt ouvert sur le marché de l’or est à son plus haut depuis 2020 et 2016 (surchauffe approach sur les contrats ouverts ?). https://t.co/HuTfVPZyIj pic.twitter.com/sts5MGN98c
— Thomas ANDRIEU (@ThomasAndrieu_) October 30, 2024
As a matter of truth, the gold market recorded a degree of derivatives exercise as excessive as in 2020 (main peak) or 2016 (main dip). It is attainable that we’ll see the identical sort of sign in 2025, provided that the return of traders makes the market notably delicate to any variation in curiosity and quantity.
Supply : Commitments of Traders (COT) Charts – Barchart.com
From a long-term perspective, the value of gold is testing the highest of its very long-term channel (logarithm), and nearly the highest of its long-term channel (since 2014). Notice that the true worth of gold (adjusted for inflation) is on the verge of reaching an all-time excessive (surpassing the 1980 peak of $2,750 per ounce in as we speak’s {dollars}). A sustained breakout of the gold worth above this degree would seem like an vital sign within the historical past of the dear steel. Equally, a return of gold to its ranges of 10 years in the past appears utopian as we speak, given the very excessive manufacturing prices going through mining firms.
Conclusion
Gold’s common efficiency since 1978 is +6.3% p.a., with a volatility of +16%. A really affordable efficiency for a measured threat, decrease than that of inventory market indices. Nonetheless, some years can present distinctive performances, near +30%. On this respect, 2024 will go down in historical past as a file 12 months for the yellow steel.
For the third 12 months operating, our gold worth forecast has proved right. Making use of the identical methodology, the most probably situation for 2025 is for gold to rise by a median of round 10%. This could push the gold worth near the symbolic $3,000 threshold, additionally monitored by most main banks. Nonetheless, this speculation is very depending on momentum, and extra particularly on investor curiosity and the state of the economic system. Within the case of a pullback situation, it’s attainable that gold may retreat by 8% on the idea of the 9-year cycle. However the speculation of a pointy decline within the gold worth appears unlikely in a context of steadily rising manufacturing prices since 2016.
Historically, the primary components driving up the value of gold are falling rates of interest, rising geopolitical dangers and recessions at this stage of the cycle. Final however not least, persistent structural inflation helps to drive up manufacturing prices, which in flip is boosting gold’s worth.
Additional decryption would inevitably lead us to the conclusion that gold stays true to its fidelity.
In spite of everything, as Lao Tzu mentioned, “gold and jade refill the room. Nobody is in a position to defend them”…
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