China Starts the Santa Claus Rally

China Resumes Buying Gold, Setting the Stage for the Rally

Two bits of news out of China over the weekend appear to have kicked off the "Santa Claus Rally" that we discussed as a likelihood last week. So, if we are to rally into year-end, what might be some price levels to watch as we set the stage for another solid year in 2025?

If you missed last week's post, I'll ask you to refer to it now. Prior to the news out of China, there were plenty of reasons to expect a December rally in precious metal prices. We just needed a spark of interest to flip the prevailing sentiment.

The People's Bank of China and Gold

So, what are the two bits of news out of China that have set off the initial stage of our rally? First, after a six-month hiatus, the People's Bank of China (PBOC) announced that they had resumed their gradual accumulation of physical gold. When the PBOC announced in June that they were suspending their gold buys, the price of gold fell by about $50. As such, it's nice to see the resumption of Chinese today.

Fiscal Policy Shift in China

While the resumption of PBOC gold buying is an important long-term positive, the other news China announced on Monday might have a bigger impact on price in the short term and into 2025. And what was that other news?

This move by China to announce a "moderately loose fiscal policy" is the first public shift since 2011. That the government and PBOC will be more "proactive" to "boost consumption" is a sign of loose financial conditions that will drive Chinese monetary stimulus and credit impulse. This should serve as a very strong fundamental for all commodities next year, and you can see the immediate reaction today in copper. Check the chart below and notice that price has rallied about 2% today and is now already more than 5% off its recent lows.

High Grade Copper - Daily Candlestick Chart

Gold and Silver Price Levels to Watch

More importantly for us, let's check the charts of COMEX gold and silver. After a significant price pullback in November, prices have begun to turn back higher. As milestones and technical levels are breached to the upside, the likelihood of a sustainable "Santa Claus Rally" grows.

For COMEX gold, notice that the rally of Monday, Dec. 9, has taken price right to the confluence of three important technical resistance levels:

• Psychological resistance at the round number of $2700.
• The 50-day moving average.
• The downtrend line from the all-time highs seen in late October.

So watch closely now—through this week's U.S. inflation data and next week's FOMC meeting—to see if price can move through all of that resistance and then continue to move higher into year-end.

Gold - Daily Candlestick Chart

For COMEX silver, the key technical chokepoint appears to be $33/ounce. This price level has often provided stout resistance to rallies, and I'd expect the same reaction here. However, be sure to note that unlike COMEX gold, COMEX silver has already climbed above its own 50-day moving average. This is a very encouraging sign as is the clear double bottom of support that price found near $30 and the 200-day moving average a few weeks ago.

Silver - Daily Candlestick Chart

Strong Prospects for 2025

In summary, the time is right for a year-end rally, and the fundamentals for 2025 are improving. Let's watch to see if gold and silver prices can finish 2024 on an uptick, and then prepare for extended gains in the new year.

Take action today and buy gold and buy silver to capitalize on these rising trends.