Hi YXI friends,

This is a brief review of Gold for end of December.

There are two key observations right now:1) Gold’s seasonality patterns may be changing, and 2) Gold is still under pressure from the Global Liquidity downturn.

I expect further short-term weakness before an eventual rebound into a new all time high in 2025.

Table of Contents

• 1. Seasonal Patterns Are Shifting

• 2. A Greater Force At Work - Global Liquidity

• 3. European And North American ETF Inflows

• 4. China Remains Uncertain

• 5. Technical Analysis: Unfinished Near-term Pain

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. Seasonal Patterns Are Shifting

Using GLD (a physically backed Gold ETF) as proxy to Gold prices, we observe that since 2005, Gold has enjoyed a win rate of 68% in Decembers with an average return of 3.4%.

However, today (December 30, pre-US market open), GLD is down 1.7% on the month. If GLD ends the month at this level, it will be the fourth time in five years that December has been negative, even though the rest of the year was utterly exceptional.

2. A Greater Force At Work - Global Liquidity

Global Liquidity here is being approximated using the M2 supplies of US, Eurozone, China, UK, and Japan. One could throw in more countries in here, but I find these 5 regions can explain a great majority of the picture.

We observe a 3-week lag between our measure of Global Liquidity and GLD. Specifically, Global Liquidity topped at the end of September, with GLD topping near the end of October.

The retreat of Global Liquidity is driven by a relentlessly higher US Dollar since the market began pricing a Trump win as well as the positive economic data surprises in Q4. These factors have pushed inflation expectations as well as US bond yields higher.

Thinking about Gold / Silver / Bitcoin in foreign exchange terms, a higher USD implies lower prices for these assets all else equal. Moreover, a higher interest rate increases the opportunity cost of holding non-cash-flow yielding assets.

Currently, the Global Liquidity chart does not support a strong rebound in Gold price yet. Ideally, we want to see yields and USD start reversing to provide a foundation for the next leg higher in Gold price.

3. European And North American ETF Inflows

The November drop in Gold price saw ETF outflows, especially in Europe and North America. However, we recently saw European and North American Gold ETFs warming up again, with a total of 17 tonnes of inflows in the week ending 20 December.

Zooming out, Europe and North America had been net sellers of Gold until Q3 2024. This pattern is beginning to change in the past 6 months, and I do think the next, and perhaps the final, leg of this bull cycle should see European and North America turning much more bullish on the back of both institutional and retail demands.

4. China Remains Uncertain

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