Gold SWOT: Gold Can Break Through $3,000 By The End Of Next Year, Goldman Sachs Says

Strengths

• The best performing precious metal for the past week was gold, up 0.27%. According to Bank of America, central bank gold inflows totaled 2,575 tons over the past five years, with the largest buyers being China (+412 tons, a 22% increase in holdings), Türkiye (+359 tons or +141%), Poland (+299 tons, or +232%), India (+280 tons, or +47%) and Russia (+223 tons, or +11%).  
• Gold rose after China’s central bank added bullion to its reserves for the first time in seven months. That was the first addition since April, which was the end of an 18-month run of purchases that had helped underpin prices, according to Bloomberg.
• Premiums for gold and silver futures in New York swelled as traders weighed the possibility of precious metals being included in sweeping tariff measures proposed by President-elect Donald Trump.  The price moves have been fueled by short covering by banks and funds who are buying Comex futures and selling contracts in London, said Nicky Shiels, head of metals strategy at MKS Pamp SA.

Weaknesses

• The worst performing precious metal for the past week was silver, down 2.05% with its higher beta to gold’s volatility. According to Morgan Stanley, the November month-over-month (MoM) import value of lab-grown diamonds fell by-30% MoM/28% year-over-year (YoY), while export value fell by a steeper 54% MoM/42% YoY. This also points to some inventory build-up. The trend of market-share gains vs. natural stones appears to have paused in November as both markets declined sequentially by a similar order of magnitude.
• Torex Gold Resources announced it has received a notification from the Director General of Mines under the Federal Ministry of Economy that all activities within its Morelos Property are to be suspended to support their inspection associated with the fatal incident at the ELG Underground on December 5, according to Scotia.
• Lundin Gold shares fell Tuesday after the company reported higher costs projections from its operations as part of its guidance. The Canadian gold miner said late Monday that it expects to produce about 475,000 to 525,000 ounces of gold from its operations in 2025, according to Dow Jones.

Opportunities

• Gold may get a modest setback from the Federal Reserve this month, but options traders are optimistic this will just be a blip in the road higher. More broadly, gold found a new lease on life this year, with investors moving away from swaying to the tune of real rates and, instead, finding inspiration from market pricing for the Fed funds rate, according to Bloomberg.
• Fed Chair Jerome Powell recently commented that Bitcoin was like “digital gold,” and he did not see it as a threat to the dominance of the U.S. dollar. However, some might interpret that Powell just said that Bitcoin is just as good as gold, or in fact it has been better than gold in price appreciation under current economic conditions! Stifel Equity Strategy team led by Barry Bannister presented the argument that makes gold and Bitcoin look like polar opposites when you consider the conditions what drives their respective asset values. Barry contends that Bitcoin needs a dovish Fed coupled with low inflation and sold economic growth as it primary price driver. Gold is more defensive and tends to perform better in an inflationary environment. Tariffs could be the first disruption to reset core inflation closer to 3% by the second half of 2025, trigger higher interest rates and risk an economic slowdown.

• Gold prices can break through the $3,000 barrier by the end of next year—even if the dollar stays high, Goldman Sachs said, pushing back on recent commentary. The team advises investors to watch the Federal Reserve's actions, not the dollar, to determine how high gold prices can go in 2025. 

Threats

• On a recent episode of MSNBC’s All In, host Chris Hayes said that a Senate bill could potentially result in a $100 billion transfer from taxpayers to Bitcoin owners. The bill, proposed by Sen. Cynthia Lummis, calls for the U.S. Treasury to acquire 1 million Bitcoins over a span of five years, with a holding period of at least 20 years.
• Bitcoin has soared more than 50% since Nov. 4, topping $100,000 in part on hopes that crypto advocate—having donated some $135 million to Trump and dozens of successful congressional campaigns—will persuade Trump to make the crypto reserve a reality, according to Bloomberg.
• Zimbabwe is planning to hold 26% of new mining projects on a free carry basis and will also negotiate with existing operators to acquire a similar stake. “We need to move to a level where we reach 26% shareholding in most of the big projects,” Zimbabwe’s Secretary for Mines Pfungwa Kunaka told Bloomberg in an interview.

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