CPM predicts higher gold prices ahead, but volatility looms

US-based CPM Group expects gold prices to continue rising in the coming months, but warns that the likelihood of a sharp pullback increases as prices climb.

For several years, CPM has been projecting a cyclical peak for gold prices in 2024 or 2025, followed by a decline. “With all of what is happening now politically, economically, and financially in the world, there is a possibility that prices could be in the midst of reaching this cyclical high,” the company stated in a report to clients.

CPM believes that markets are entering a phase of steeper price increases. 

“We do not think this is the peak but the start of a push toward what may prove to be a cyclical peak at some point in the next several months,” the firm said.

The consultancy also reiterated that investment demand for gold and silver, and their prices, are likely to reach new record levels through the fourth quarter of 2024 and into the first quarter of 2025.

Short-term profit-taking is expected along the way, according to CPM. “Indeed, depending on the execution of the US Presidential and Congressional elections on November 5, and the aftermath thereof, prices could come off sharply if briefly. Or they just as easily could spike higher.”

However, the uncertainty surrounding the US elections is not the only factor driving market risks, as CPM says geopolitical tensions – including the Russian invasion of Ukraine, ongoing conflicts in the Middle East, and tensions in the South China Sea and Taiwan Strait – could lead to sudden shifts in policies that impact short-term gold and silver prices, either positively or negatively.

With gold prices up approximately 32% since the end of 2023, outperforming many major asset classes, CPM advised locking in some of these gains while preserving upside exposure. “Producers and investors could benefit from a hedge that would cost a small percentage of the value of the gold price gains made so far this year,” the firm suggested.

Historically, gold prices tend to rise in the final quarter of the year and into the first quarter due to seasonal demand, but current macroeconomic and political conditions are likely to further amplify this seasonal trend. While CPM remains bullish on gold prices in the short term, it also highlighted the possibility of sharp corrections, citing examples of recent price drops after sharp gains.

“Ongoing strength in the US economy or a less-than-expected reduction in the Federal Funds rate over the next two meetings could be one factor that drives a short-term pullback in gold and silver prices,” CPM warned.