Gold Prices Surge to Record Highs, But Analysts Predict a Steep Decline
Gold prices have reached unprecedented levels, offering significant gains for investors but causing financial strain for consumers. Currently, 24-carat gold is priced near Rs 90,000 per 10 grams in Indian markets and above $3,100 globally.
Gold prices have reached unprecedented levels, offering significant gains for investors but causing financial strain for consumers. Currently, 24-carat gold is priced near Rs 90,000 per 10 grams in Indian markets and above $3,100 globally. However, a US-based analyst from Morningstar has predicted a sharp drop in gold prices, forecasting a 38% decline in the coming years.
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US Analyst Predicts a 38% Drop in Gold Prices
John Mills, a strategist at Morningstar, has forecasted a steep reduction in gold prices, expecting the price to fall to $1,820 per ounce from the current $3,080 per ounce. This could translate to a potential drop to around Rs 55,000 per 10 grams in the Indian market, impacting investors who have benefitted from the recent rally.
Factors Driving the Potential Decline in Gold Prices
Gold’s recent surge was largely driven by economic uncertainty, inflation concerns, and geopolitical tensions. During the trade disputes initiated by former US President Donald Trump, many investors turned to gold as a safe asset. However, a combination of factors could lead to a downturn in the metal’s value:
- Increased Gold Supply:
Gold production has surged, with mining profits reaching $950 per ounce in the second quarter of 2024. Global reserves have expanded by 9%, with countries like Australia ramping up production, and recycled gold supply on the rise. - Declining Demand:
Central banks, which purchased 1,045 tonnes of gold last year, may reduce their acquisitions. A survey by the World Gold Council revealed that 71% of central banks plan to either reduce or maintain their gold holdings, signaling a decrease in demand. - Market Saturation:
The gold sector saw a 32% increase in mergers and acquisitions in 2024, suggesting a saturated market. Additionally, the rise in gold-backed ETFs reflects patterns seen before past price corrections, indicating a potential upcoming shift in market dynamics.
Optimism from Financial Institutions: BoFA and Goldman Sachs
Despite the bearish outlook from Morningstar, some financial institutions remain optimistic about gold’s future. Bank of America predicts that gold could rise to $3,500 per ounce in the next two years, while Goldman Sachs expects a year-end price of $3,300 per ounce. The market’s future trajectory will depend on how gold performs in the coming months.
Also Read: Gold Prices Hit Record Highs: Will They Drop Soon?
What Does This Mean for Investors and Consumers?
While the recent surge in gold prices has benefited investors, especially those holding gold-backed assets, a potential price drop could have significant consequences. Consumers who have been facing the brunt of high prices may find relief if gold prices decline as forecasted. For investors, the outlook remains uncertain, and many will be watching closely to see if gold can maintain its current momentum or if the predicted decline comes to fruition.
As the global economy and financial institutions react to these changing dynamics, the future of gold remains in a delicate balance between supply, demand, and market sentiment.
