Gold Prices Hit Record Highs: Will They Drop Soon?
Gold prices have reached historic highs, with the price of 24-carat gold approaching Rs 90,000 per 10 grams in India and surpassing $3,100 per ounce globally. While investors have profited, this surge has strained consumers, particularly in India, where gold holds cultural and economic significance.
Gold prices have reached historic highs, with the price of 24-carat gold approaching Rs 90,000 per 10 grams in India and surpassing $3,100 per ounce globally. While investors have profited, this surge has strained consumers, particularly in India, where gold holds cultural and economic significance. However, a new forecast from a US-based Morningstar analyst predicts a sharp decline in gold prices, raising concerns for investors and traders alike.
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US Analyst John Mills Predicts 38% Decline in Gold Prices
John Mills, a strategist at Morningstar, has forecasted a significant reduction in gold prices over the next few years. Mills predicts that gold could fall to $1,820 per ounce from its current price of $3,080 per ounce, representing a steep 38% decline. If this forecast materializes, the price of gold in India could drop to around Rs 55,000 per 10 grams, offering some relief to consumers but challenging those who invested during the surge.
Factors Driving the Potential Gold Price Drop
Several key factors are contributing to the anticipated decline in gold prices. Gold’s recent price rally has largely been driven by global economic uncertainty, inflation concerns, and geopolitical tensions. Investors flocked to gold as a safe-haven asset, especially amid trade disputes initiated by former US President Donald Trump. However, several factors are now pointing toward a potential downturn in gold’s market value:
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- Increased Supply of Gold: Gold production has surged, with mining profits reaching $950 per ounce in Q2 2024. Global reserves have grown by 9%, reaching 2,16,265 tonnes, and Australia has ramped up production. Additionally, the supply of recycled gold is on the rise.
- Declining Demand from Central Banks: After buying 1,045 tonnes of gold in the previous year, central banks may scale back their acquisitions. A World Gold Council survey found that 71% of central banks plan to either reduce or maintain their gold holdings, which could result in lower demand.
- Market Saturation: The gold sector has seen a significant increase in mergers and acquisitions, up by 32% in 2024, indicating that the market may be reaching its peak. Furthermore, the rise in gold-backed ETFs suggests a pattern seen before past price corrections.
Contrasting Predictions from Financial Institutions
Despite John Mills’ forecast, some major financial institutions remain optimistic about gold’s future performance. Bank of America has projected that gold could reach $3,500 per ounce in the next two years, while Goldman Sachs anticipates a year-end price of $3,300 per ounce. The conflicting outlooks highlight the uncertainty surrounding gold prices, with the coming months likely to determine whether gold will continue its ascent or face a sharp decline.
What Lies Ahead for Gold Prices?
As gold prices remain at record highs, the debate over their future trajectory continues. While some analysts predict a significant decline, others believe gold could surge even higher in the coming years. Investors, consumers, and industry professionals will need to closely monitor market conditions and economic trends to navigate the evolving gold market landscape.
