A market analyst said that investors hoping for a Santa Claus rally in gold prices should act cautiously, as recent fluctuations may indicate that gold prices have peaked, at least this year.

Ole Hansen, the head of commodity strategy at Shengbao Bank, pointed out in his latest report that gold has recorded strong gains in December for the past seven years.

Although the recent pullback in gold prices may attract some bargain hunting in the last month of 2024, he said that the rise in gold prices is still a risk.

He said in the report, "The biggest downside is still the strong 28.3% increase in gold prices this year, close to 29.6% in 2010 and 31% in 2007. Although the fundamental support outlook for 2025 has not changed, this magnitude of increase may attract profit taking and liquidation before the end of the year

Although it may be difficult for gold prices to reach a new high in December, Hansen said he is still optimistic about 2025 and expects gold prices to reach $3000 in the new year. He added that geopolitical uncertainty should continue to support gold.

He said, "People generally believe that imposing trade tariffs on US imports next year would be beneficial for the US dollar. However, the chain reaction of a stronger US dollar could affect the global economy, especially hurting countries that rely on dollar denominated debt, commodity trade, and export driven growth, which could provide sustained support for alternative investments such as gold and silver. Trump's aggressive plans in tariffs, tax cuts, and deportations highlight the risk of unexpected increases in inflation and debt, which are two factors that gold investors seek protection from

Hansen also pointed out that gold should benefit from further central bank purchases and the Federal Reserve's loose monetary policy.

Despite facing strong selling pressure, Hansen's long-term bullish outlook on gold has held onto the key support level of around $2600 per ounce. He stated that in the short term, gold is still susceptible to potential policies of President elect Trump.

Hansen pointed out that after Trump announced his intention to nominate traditional Wall Street financier Scott Bessent as the Secretary of the Treasury, gold prices opened down 3% last week. The market expects Bessent to become a stable and safe helper for the US economy, which weakens the attractiveness of gold as a safe haven asset.

However, late last week, Trump threatened to impose tariffs on relevant countries in the Americas and Asia. Economists point out that a potential trade war could plunge the global economy into recession.

Daily chart of spot gold