Gold prices, which recently surged to record highs, have been a boon for investors but a growing concern for consumers purchasing jewellery. However, analysts now warn that the precious metal might be on the brink of a significant downturn, with some forecasts predicting a dramatic 38% drop in the next 5 years. As of Monday, March 31, the price of 24-carat gold was recorded at Rs 89,510 per 10 grams. If the anticipated decline materializes, prices could plummet to around Rs 55,496 per 10 grams, marking a substantial decrease that could reshape investment strategies globally. John Mills, a market strategist at US-based financial services firm Morningstar, projects that gold prices could fall to $1,820 per ounce, a stark contrast to the current price of approximately $3,080 per ounce. This would represent a nearly 38% reduction, a scenario that could dramatically alter the dynamics of the gold market. The recent surge in gold prices has been driven by a mix of geopolitical uncertainty, economic instability, and inflation concerns. Investors flocked to gold as a safe haven amid fears of fluctuations in the US economy and global markets.
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The ongoing trade tensions that began during former US President Donald Trump’s administration further intensified these concerns, boosting demand for the precious metal. Despite the current bullish trend, Mills and other analysts believe that a combination of factors could trigger a sharp decline in gold prices. One key factor is the rapid increase in global gold supply. In Q2 2024, gold mining profits soared to $950 per ounce—the highest levels in years—prompting increased production. Global gold reserves grew by 9% to 2,16,265 tonnes, with Australia significantly ramping up its gold output. Additionally, the recycling of old gold has surged, adding further supply pressure that could drive prices downward. Moreover, the recent surge in gold-backed exchange-traded fund (ETF) investments mirrors patterns observed before previous sharp price corrections, reinforcing concerns that a downturn could be imminent. However, not all experts share the same bearish outlook. Major financial institutions, including Bank of America and Goldman Sachs, remain bullish on gold. Bank of America projects that gold could climb to $3,500 per ounce within the next two years, while Goldman Sachs expects prices to reach $3,300 per ounce by the end of this year.