Gold, Silver End the Week Down as Wall Street’s “Santa Rally” Ends Early; Investors Fret Over Tariff Possibilities

 

Gold and Silver End the Week Down As Wall Street “Santa Rally” Slows

(Bullion News Network) – UPDATE (6:45 PM CST, 12/27/2024): Gold recovered about half a dollar by market close, but silver fell another $.03, dropping below $29.50 per troy ounce. Both precious metals will end the week down, falling in line with the stock market, which dropped as the “Santa rally” ended prematurely. 

Gold and silver are on track to end a second consecutive week in the red this afternoon. Following a shortened holiday trade week and moderate post-Christmas price jump, gold shed over $12 on Friday before market close. Silver also dropped on Friday, losing around $.30 per troy ounce after a week of sideways price action. Both metals moved in the same direction as the stock market, which dropped this morning after a short-lived “Santa rally” on Thursday. The rally has been replaced with what some analysts call the “Grinch pinch.” 

The “Santa rally” refers to a phenomenon of improved stock market performance during the last five days of December, as well as the first two trading days of the following year. The Santa rally does not always occur but tends to be an early signal of economic health heading into a new year. This year’s Santa rally appears to have ended early, with the Dow shedding 300 points and the NASDAQ losing 2% since market open. According to some experts, this may signal that the stock market’s post-election optimism may be fading as traders look forward into a new presidential administration promising major monetary reform. 

US stocks often do well this time of year, earning the nickname of the “Santa Claus Rally.” Can they repeat the gains as 2024 turns to 2025? https://t.co/88CmobWOKP

— Bloomberg Markets (@markets) December 27, 2024

During the 2024 presidential election cycle, President-elect Donald Trump’s proposal for a universal tariff on imported goods became a contentious talking point for both candidates. Trump, who swept all seven battleground states on November 5th, contends that a universal tariff would increase the strength of American manufacturing and technology while giving the United States a negotiating tool it can use to secure its foreign policy interests. Opponents of the plan say that the implementation of such broad protectionist economic policies could raise consumer prices, inflame relations with foreign nations, and risk counter-tariffs from targeted countries. Experts are divided on how tariffs would likely impact precious metal prices.

Wall Street celebrated in the immediate aftermath of Trump’s surprising re-election victory as traders bet on a slate of deregulatory and economically stimulating policies from the lifelong businessman and former president. Consumer sentiment also climbed following the election. Both consumer confidence and Wall Street’s celebration dropped this week. On Monday, the United States Conference Board reported a slump in consumer confidence, with medium-term earning expectations dropping back to pre-election levels. Metal prices dropped on the news, moving in tandem with the stock market. Officials from the Conference Board warn that this key consumer confidence index is now close to 80 – a reading that has historically precipitated recession. This drop in consumer sentiment, combined with the early end to 2024’s Santa rally, has ignited concerns that Americans are once again worried about the future of the economy. Although the Santa rally has turned into a Santa slump, it is not yet clear how precious metals will react to the flip in consumer and business confidence. 

What does the Santa rally mean for precious metals? Depending on its length and strength, the Santa rally is typically a positive sign for the U.S. economy – and a bad sign for precious metal prices. Since gold and silver tend to move opposite to traditional stocks and bonds, a Santa slump usually means investors pull their money from safe haven assets to instead bet on interest-bearing investments. The quick end to the Santa rally should theoretically have been a boon for safe haven gold and silver, analysts say, but this year has been nothing if not atypical. Even in the precious metals market, the potential impacts of a universal tariff are difficult to predict. Some analysts believe that gold and silver prices will increase in the event of a new round of tariffs on foreign products, while others warn that Americans’ access to foreign investment-grade bullion products may be threatened if President Trump follows through on his tariff promises. 

Precious metals instead continued to slide along with Wall Street, with both metals logging a second weekly loss to round out the last full trading week until 2025. Like the stock market, it appears that precious metal traders are bracing for an eventful first month of 2025!