Gold spot price hit a record high of $3,160 per ounce.
Morningstar projects gold could fall to $1,820 per ounce, a potential 40% drop within 5 years.
Expanding gold mining projects and oversupply concerns.
71% of global central banks plan to maintain or reduce gold reserves.
Opinion
Morningstar believes that rising supply and waning demand will drive a long-term bearish trend in gold prices, viewing the recent rally as a temporary phenomenon.
Core Sell Point
Gold is exposed to significant downside risk due to supply expansion and weakening demand.
Gold prices recently surged to an all-time high of $3,160 per ounce, but Morningstar warned that the precious metal could face a significant correction in the coming years. John Mills, an analyst at Morningstar, projected that gold could decline by as much as 40% to around $1,820 per ounce within the next five years.
Mills pointed to a sharp increase in supply as the primary driver of the anticipated decline. He noted that gold mining profitability has reached its highest level since 2012, prompting major producers like Australia to accelerate new mining developments. At the same time, gold demand from both central banks and investors is expected to weaken. According to a recent survey by the World Gold Council (WGC), 71% of global central banks plan to either maintain or reduce their gold holdings over the next 12 months.
Mills further argued that the recent rally in gold was largely driven by safe-haven demand amid Trump's tariff policies and global economic uncertainty, making the surge likely temporary. He referenced the post-pandemic period as a parallel, where gold spiked but later retreated sharply.
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