Gold prices have fallen from their peak due to profit-booking, which has reduced the precious metal’s luster. However, following a brief correction, analysts predict the surge will likely continue.
Amid geopolitical worries, investors from all over the world flocked to gold for protection, pushing prices of the yellow metal to all-time highs. Given the sharp increase in value, several analysts thought the asset was overbought and ready for a drop.
As is often the case when the commodity is trading at an all-time high, gold prices have temporarily sold off some of their gains. According to Bhavik Patel, Senior Commodities Analyst at Tradebulls Securities, investors are currently taking their profits off the table since they believe the risk/reward ratio is not favourable on the upside. Additionally, as the worldwide trend drains billions from investors’ portfolios, investors have been registering gains in the safe haven asset to offset losses in other bets.
Prior to U.S. President Donald Trump’s announcement of tariffs, the price of gold was rising due to significant central bank purchases. Additionally, concerns about retaliation from important trading partners and the possibility of a full-scale trade war increased demand for safe haven assets, which helped to contain losses. In addition, investors have changed their inclinations from cash settlements to physical gold delivery due to worries that tariffs may cause shipment delays.
Analysts at Bank of America predict that COMEX gold prices might rise to $3,500 per ounce over the following two years, while Goldman Sachs projects that gold prices will reach $3,300 per ounce by the end of 2025. Experts predict that gold prices will continue to rise. At the moment, COMEX gold prices are circling the $3,100 per ounce mark.
However, given that prices are expected to stabilise, the trend may be somewhat negative in the near future. According to Patel, “there are many reasons why gold is not correcting; the trade war worries, the ongoing geopolitical conflict, the acceleration of de-dollarization, and strong central bank buying are supporting prices.”
As a result, if gold declines, there will be several tailwinds to support the safe-haven asset’s recovery. Conversely, he said, there aren’t many short-term events that may cause gold to reach new highs.
The research company Morningstar shares an extremely pessimistic perspective, predicting that the value of gold might decline by 40% over the coming years. According to a Morningstar analyst, gold is currently trading close to $1,820. In the event that this decline were to occur domestically, gold prices would drop to between Rs 55,000 and Rs 56,000 per 10 grammes.
Morningstar predicts that as demand for gold cannot keep up with the rising supply, prices will fall. As gold mining has become more profitable, nations all over the world have increased output, and gold recycling has also increased.
The research group also thinks that central banks will probably stop buying gold so obsessively. Given that economic worries are usually transient variables that affect gold prices, investor interest is also anticipated to decline, according to the Morningstar analysis.
Patel rejected the report. Only when there are no trade conflicts, the world economy is growing, equities markets are at an all-time high, and geopolitical fears are absent would gold prices drop by 40%. We don’t currently envision such a situation occurring. Disclaimer: Neither the website nor its management endorse the opinions or financial advice shared by Moneycontrol.com’s investment experts. Before making any financial decisions, Moneycontrol.com urges customers to consult with qualified professionals.
