Gold prices could experience a short-term pullback as investors trim their long positions, but persistent inflation and ongoing geopolitical instability should prevent a significant decline in 2025, according to TD Securities analysts.
In their 2025 Commodities Outlook, TD Securities highlighted the key drivers behind gold’s remarkable surge this year. These included the Federal Reserve’s interest rate cuts, geopolitical uncertainties, and robust central bank buying. However, despite these supportive factors, fund flows into gold have been less consistent, suggesting that the rally may be losing momentum.
“While a range of compelling macroeconomic narratives have fueled the recent gold rally, many of these themes have not been backed by sustained fund flows,” the analysts stated. “Macro funds have held long positions since August, as reflected in the Commitments of Traders (COT) report, yet the overall market activity has been tepid. Moreover, Shanghai traders have liquidated approximately 35 tons of gold in recent weeks, as improving domestic investment opportunities diminished the appeal of gold.”
TD Securities noted that despite record gold withdrawals from the Shanghai Gold Exchange (SGE) hitting their lowest levels since 2020, fund flows into the market remained weak ahead of the U.S. elections. While such conditions typically suggest heavy over-the-counter (OTC) buying, data from the London Bullion Market Association (LBMA) did not corroborate this hypothesis. The analysts further observed that central bank buying, both reported and unreported, had significantly slowed in recent months, hinting at “hoarding behavior” related to the political uncertainty surrounding the U.S. election.
“Following the election, a large-scale sell-off was observed as risk factors diminished,” TD Securities noted. “Our analytics suggest that macro funds were the first to sell on election night, liquidating nearly 60% of their large positions in just a few weeks. This led to further selling by commodity trading advisers (CTAs), although the magnitude of the sell-off remained relatively contained.”
While the rally in gold was largely driven by expectations of a rapid Fed rate cut, U.S. political instability, and strong central bank purchases, TD Securities cautioned that the peak of these supportive factors has likely passed. “Rate cut projections have been sharply reduced following the U.S. elections, which resulted in a stronger dollar and raised inflation risks as economic growth remains robust,” they warned. “These shifts, combined with weaker demand for physical gold from central banks and retail investors, suggest that the market may be poised for a consolidation phase.”
As a result, TD Securities anticipates some profit-taking among traders with large gold positions, especially in light of rising bond yields, strong equity markets, and a shifting geopolitical landscape. “With macro funds already liquidating significant positions, the scope for further selling is limited,” the analysts wrote. “Moreover, the outlook for monetary policy has become less favorable for extreme long positions, reducing the likelihood of an overly dovish stance from the Fed.”
The firm also noted that the low level of CTA liquidations further limits the potential for future buying programs to sustain gold prices. While the Chinese government’s policy response to economic challenges could bolster global growth, TD Securities argued that this may diminish gold’s appeal as a safe haven. “In the face of growing optimism for global asset markets, gold may struggle to maintain its record-breaking rally,” they added.
Despite these concerns, TD Securities emphasized that while a correction in gold prices is possible, a full-scale rout is unlikely. “Uncertainty will continue to drive demand for gold as a hedge, particularly as questions arise about the independence of the Federal Reserve under the new GOP regime in Washington,” the analysts said. “The possibility of a more dovish Fed Chair being appointed in 2026 could further complicate the central bank’s policy trajectory.”
Looking ahead, TD Securities forecasts that spot gold will trade at $2,675 per ounce in the first quarter of 2025, peaking at $2,700 in Q2 before settling at $2,625 in both Q3 and Q4. Their outlook for 2026 suggests a moderation in prices, with gold starting the year at $2,600 per ounce and falling to $2,525 by the end of the second half.
As gold faces a volatile near-term outlook, the analysts remain cautious but optimistic about the metal’s long-term prospects in an uncertain macroeconomic environment.
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