As the festive season approaches, many investors had their hopes pinned on a significant rally in gold prices, commonly referred to as the "Santa Claus rally." However, it seems that those expectations might be met with disappointmentRecent trends in the gold market have not aligned with investors' optimistic forecastsWhile December is traditionally seen as a peak trading season for gold, this year’s price trajectory presents considerable challengesAnalysts emphasize the need for investors to reassess their strategies and expectations, given the factors at play.

Gold prices have seen an impressive ascent this year, increasing by approximately 28.3%, nearing the historic highs made in 2010 and 2007, which were around 29.6% and 31%, respectivelyOle Hansen, the commodities strategist at Saxo Bank, points out that while gold has performed well in December over the past seven years, there are potential signs that the market may have reached a ceiling this year

With such significant prior gains, profit-taking behavior could lead to a decline, making any further increases challenging.

In Hansen’s analysis, he states, "Although December’s pullback may attract some bargain hunters, we believe that further increases in gold prices carry substantial risksThe strong performances in the past few months might indicate that the market will see selling pressure.” This caution reflects a sentiment in the investment community that, notwithstanding December's seasonal trends, the extraordinary increases in gold prices this year point towards a possible retreat.

Yet, not all perspectives are dimLooking ahead to 2025, Hansen expresses a positive outlook for gold prices, predicting that they could soar to a remarkable $3,000 per ounceSupporting this bullish forecast is the global geopolitical uncertainty and potential changes in economic policies

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A notable factor to consider is the likelihood of the United States imposing higher tariffs on imported goods, which could spur inflation globallyTraditionally viewed as a safe-haven asset, gold typically thrives in an environment characterized by such uncertainties and inflationary pressures.

Hansen notes, "Aggressive government policies, particularly those concerning tariffs and economic stimulus, could lead to instability in the global economy and consequently boost demand for gold.” This perspective underscores the dual role of gold as a valuable asset in times of economic clarity as well as crisis.

Policy changes may serve as a double-edged sword for gold pricesPotential tariffs and threats directed at countries throughout the Americas and Asia could significantly impact the global economy, particularly affecting nations that rely heavily on dollar-denominated debt and commodity trading

Such circumstances could drive investors to seek refuge in gold, thereby propping up its priceAdditionally, the demand for gold purchases by central banks is anticipated to be a pivotal force in pushing gold prices upwardsHansen believes that the Federal Reserve's ongoing loose monetary policy will further underpin the long-term positive trajectory of gold prices.

Despite the optimism for the long-term, gold prices remain sensitive to short-term influencesIn the past week, news regarding the nomination of traditional Wall Street financier Scott Bessent as U.STreasury Secretary resulted in a temporary downturn, with gold prices dropping by about 3%. The general belief is that Bessent's appointment could bring greater stability to the U.Seconomy, diminishing the immediate demand for gold as a safe haven.

However, Hansen warns that potential policy implementations, particularly the threat of tariffs against specific countries, might rekindle interest in gold as a refuge asset amid recessionary risks in the global economy.

In conclusion, while short-term projections suggest that gold may face certain selling pressures following the impressive gains seen this year, the complex interplay of global uncertainties, economic risks in the U.S., and evolving government policies provide a supportive backdrop for gold’s long-term growth