Dow Hits Bearish Record While Gold and Silver Poised for New Year Breakout
Contributed Opinion

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I would like to wish everyone a Merry XMAS, a great holiday, and a Happy New Year. I doubt I will put much out next week unless there is a very good buy or sell opportunity among the things I follow.

And sorry, there will be no Santa Claus rally this year. I believe this is part of a major transition in the economy and markets that is upon us, and it won't be pretty. The record for the number of down days in a row for the Dow Jones is 11, in late September and early October 1974. As of Thursday, we matched that 11-day record, which was also in a period of stagflation. The DOW is rebounding today, so it looks like we won't see a new bear record by the close. The index is around a support level, and a break below 41,500 would be bearish.

Over the years, I have pointed out the typical year-end weakness in the gold price. It happens about seven or eight years out of ten, usually in December but sometimes in October/November.

Previously, I highlighted that this year's low looks to be October, but a test of the low this month is no surprise. This is a buying opportunity, as I have no doubt we are headed to record highs in 2025.

It is going to be a continuation of the same driver, mostly Central Bank buying. There is a strong move out of US$ reserves into gold as high debt, high inflation, and dollar weaponization are weakening the dollar against gold.

The other important factor that is hardly mentioned is that gold became a Tier One asset in January 2023. It is treated as equal to the Yen, Euros, US$, etc., or their treasuries and bonds on bank balance sheets. It is actually better as it is nobody else liability and has a long history as a store of value over fiat currencies.

That said, most western investors have not caught on to this gold bull market yet, they are kind of in disbelief so it is likely they will start feeding this bull market sometime in 2025. As I have commented before, often, when weakness hits equity markets, it provokes diversification into gold, plus it is an inflation hedge. There is a lot of talk about Trump's Tariffs, and it really has just become more part of weaponizing the dollar, the huge mistake Biden started. Even if Trump eliminates the freeze on Russia's assets in some peace deal, BRICs countries and others will never trust the dollar again.

The conversion of US$ to gold is going to continue at a relentless pace. Note this next chart from Goldman Sachs, showing how less than two years of CB buying is five times that of the previous 16 years.

Goldman Sachs has a $3,000 target for gold in 2025, and its analysis points to significant room for growth in central bank gold reserves, particularly in emerging markets. While developed economies such as the U.S., Germany, and France hold approximately 70% of their reserves in gold, China's allocation remains strikingly low at just 5%.

The Bank cites the World Gold Council's 2024 survey, which I previously pointed out as well, where "81% of respondents expect global central bank gold holdings to rise over the next 12 months, with none anticipating a decline." India is a case in point. So far in 2024, the RBI has added 72.6t to its gold reserves, significantly outpacing the 16t added in 2023 and the 33t in 2022. Gold now represents 10.2% of the RBI's forex reserves, up from 7.8% a year ago. Charts from World Gold Council.

There is also a strong retail and investment demand. Initial reports suggest that gold imports saw a significant surge in November, reaching record levels.

According to data from the Ministry of Commerce, imports in November amounted to US$14.8bn, more than double the previous month's total and over four times higher than the same period last year.

The U.S. Central Bank is now the only CB short gold trying to defend the US$. The physical market, driven by CB demand, is setting the price as the Comex Futures market is losing its influence. The CME is to launch new 1 oz gold futures on January 13 in a desperate attempt to create more paper gold supply.

A big downfall is the contracts cannot be delivered with physical, so who will fall for this diversion? I doubt this new future contract will gain much traction.

And not to forget silver. I hear that China is absorbing huge amounts of physical silver and expects a breakout in price, which will probably come in January. Silver has lagged behind gold and still has not reached its past highs of around $50. That said, I have commented a number of times that it is normal for silver to lag gold, but when it does get going, it can outperform gold. This will probably occur in 2025. Here is the long-term chart where silver hit 11-year highs in late October.

I updated our list of gold and silver producers with what I see as the best buys: B=Buy, SB=Strong Buy, H=Hold.

We were up about 70% at the peak so a decent correction.

Bitcoin and ETFs 

Bitcoin traded down to support early this morning, before market hours around 8:00 am, and I wanted to close out our short trade. SBIT was around $12.25, so we could have caught about an 8% gain. However, these Bitcoin ETFs are seeing considerable volume after and pre-market. SBIT made over 1,600 trades in pre-market today.

Investors may trade in the Pre-Market (4:00–9:30 am ET) and the After Hours Market (4:00–8:00 pm ET). Participation from market makers and ECNs is strictly voluntary, and as a result, these sessions may offer less liquidity and lower prices. Stock prices may also move more quickly in this environment. If you intend to trade during these times, I strongly advise you to use limit orders. It is to our advantage to trade outside market hours, but I don't want to send anyone signal messages during crazy hours. I think 8:00 pm is fine, but 4:00 am is too early, so I will limit early morning to 7:00 am.