Gold Price Crash: Gold prices are currently at a record high. In the recent past, the price of gold has risen tremendously. This has benefited investors a lot. At the same time, those who buy gold jewellery for weddings or personal consumption are facing problems. However, consumers may get great relief in the coming years. A decline of up to 38% is possible.
Analyst John Mills at American financial services firm Morningstar says that the price of gold can fall to $1,820 per ounce. This will be about 38% less than the current level. This fall can wipe out all the gains made in the last 12 months.
Why are gold prices rising right now?
Gold, which has currently reached $3,080 per ounce, has become expensive due to many reasons. This includes geopolitical tensions, uncertainty about the US economy and fear of rising inflation. Due to this, investors are turning to gold in search of safe investment. Especially, US President Donald Trump's trade war has increased instability at the global level. This has fuelled gold prices.
Why can there be a huge fall in gold?
John Mills lists several solid reasons for the sharp fall in the price of gold. Let us understand those reasons one by one:
Gold supply is increasing rapidly
The first reason is that the supply of gold is increasing rapidly. When gold is expensive, more people start mining it. The average profit of gold miners in the second quarter of 2024 was $950 per ounce, the highest since 2012. The total gold reserves in the world in 2024 have increased by 9% to 216,265 tonnes.
Many countries, especially Australia, are increasing gold production on a large scale. Apart from this, old gold is also being recycled on a large scale. This is further increasing the amount of gold available in the market. Due to increased supply, pressure on prices will increase and it will become cheaper.
Signs of decreasing demand for gold
The second reason is that there are signs of a decrease in the demand for gold. Many central banks and investors have been buying a lot of gold for the last few quarters. But there is no guarantee that their interest will remain for a long time.
Central banks bought 1,045 tonnes of gold in 2024. This is the third consecutive year when purchases remained above 1,000 tonnes. But in a World Gold Council survey, 71% of central banks said they could reduce their gold holdings next year or keep them the same. Similarly, when the Corona pandemic hit in 2020, gold prices rose sharply, but as soon as the situation improved, prices started falling.
Is gold price at its peak?
History shows that when the number of deals (M&A) in an industry grows rapidly, it can be a sign that prices are about to peak. Dealmaking in the gold industry grew 32% in 2024, indicating that the gold market may be at its highest level.
In addition, new gold-linked investment funds (ETFs) have also increased in recent months, which has been seen in the past before price falls. All these factors indicate that the price of gold has peaked and may fall sharply.
Will gold really become cheaper by 38%?
Of course, John Mills is predicting a 38% drop in gold prices. But, many big analysts have the opposite opinion. Many big analysts of Wall Street are still expecting the price of gold to rise further.
Bank of America estimates that it could reach $3,500 per ounce in the next two years. At the same time, Goldman Sachs believes that it could reach $3,300 per ounce by the end of 2025. But John Mills believes that despite the current rise, gold prices may fall in the long term. And he has his own arguments to support this. Now it remains to be seen whose words turn out to be true in the end.
