Precious metals see a significant pullback at the end of the year! Gold trend forecast and investment opportunity analysis

Gold prices experienced intense volatility at the end of December. Gold briefly fell over 4%, approaching $4,300 per ounce, while silver dropped an even more astonishing 9%, falling to $70.53 per ounce. Platinum and palladium also declined by 14.45% and 15.79%, respectively. However, with market adjustments, precious metals rebounded on December 30, with gold rising back to $4,354 per ounce and silver recovering to $73.10 per ounce.

End-of-Year Liquidity Crisis Triggers Chain Reactions

There are three main driving factors behind this collective decline in precious metals. First, year-end profit-taking by market participants is a traditional phenomenon. Second, after the CME close on December 29, margin requirements for gold, silver, palladium, platinum, and lithium futures were adjusted, forcing traders with limited funds to reduce their positions. When margin standards are raised, existing holders need to add cash to maintain their positions, often triggering a wave of stop-loss orders.

Additionally, the approaching holiday season leads to liquidity contraction, which is also a key factor. Michael Haigh, Head of Fixed Income and Commodities Research at Societe Generale, pointed out, “There’s no need to over-interpret these sharp fluctuations; such extreme low-volume trading is common at year-end.” This indicates that the current decline is more driven by technical and liquidity factors rather than deteriorating fundamentals.

Short-term Headwinds and Long-term Opportunities Coexist

Alexander Campbell, former head of commodities at hedge fund Bridgewater, believes that silver faces multiple short-term resistance levels. Seasonal tax selling and the CME margin hikes will exert downward pressure. He advises investors to stay cautious and wait for these disruptions to subside before considering entry.

However, Campbell remains optimistic about silver’s long-term prospects. He has observed significant regional price disparities in the physical trading markets: Dubai silver spot quotes at $91 per ounce, Shanghai at $85, while COMEX futures are only at $75. This backwardation reflects deep market support. As the solar industry expands and data centers accelerate construction, industrial demand for silver will continue to grow, with clear upside potential.

Gold Price Outlook: Upward Channel After High-Range Fluctuations

The gold market faces more short-term uncertainties. The Federal Reserve will release the December meeting minutes in the early hours of December 31, and the market is closely watching its policy stance. UBS analysts note that gold is currently at a high premium; if the Fed adopts a hawkish stance unexpectedly, combined with large ETF redemptions, it could trigger significant corrections.

However, in the long-term outlook, analysts remain confidently optimistic about gold. UBS emphasizes that the environment of low real yields, ongoing global economic concerns, and domestic U.S. policy uncertainties (midterm elections and fiscal challenges) will provide solid support for gold. Based on these factors, UBS expects gold prices to rise to $5,000 per ounce by the third quarter of 2026. If the U.S. midterm election cycle triggers more intense political or economic turmoil, gold could even reach $5,400 per ounce.

This indicates that despite short-term technical adjustments, structural factors continue to support a medium-term upward trend.