Since late 2022, gold has been riding an unprecedented bull run, during which it has broken pivotal resistance levels and set 41 new record highs this year alone. With silver also surpassing the $50 per ounce mark, its highest price ever, the precious metals market is now standing at a crucial turning point, raising questions among investors: Where is gold headed after this record surge?
Analysts have long questioned whether gold had already peaked. Major financial institutions had anticipated prices to hit $4,000 per ounce since the beginning of the year. However, these expectations are not new; the same questions were raised three years ago when gold surpassed the $2,000 barrier, then met resistance at $2,400, and the debate re-emerged when it approached $3,000. In every instance, the precious metal managed to overcome those barriers and reach higher levels.
Today, with gold trading around the $4,000 level, experts believe a degree of caution is necessary. What distinguishes this bullish wave from its predecessors is the massive increase in investment demand over a very short period.
According to the World Gold Council, investments in Gold Exchange-Traded Funds (ETFs) rose by approximately 221.7 tonnes during the third quarter alone, equivalent to nearly $26 billion. This is a new record that has pushed total holdings to levels only about 2% away from their all-time peak recorded in 2020.
Nevertheless, the question remains: Has the market become overly saturated with buying demand?
Despite the massive inflows, gold still represents only about 2% of total global assets, while many investment institutions recommend that gold's proportion in portfolios should range between 5% and 10%. This suggests that there is additional room for further investment expansion.
The factors that drove gold to the $4,000 per ounce level are still present—and, in fact, are intensifying. These include geopolitical and economic uncertainty, persistent and high inflation, fears of a global economic recession, escalating government debt, and declining confidence in the US dollar and fiat currencies in general.
Given the continuation of these pressures, it is difficult to say that the current gold wave has reached its end.
However, one cannot ignore that $4,000 is a record level; gold has risen by over 50% since the beginning of the year, while silver has surged by 71%, delivering record profits to investors. Therefore, a price correction or a period of consolidation may not be surprising as buyers and sellers re-evaluate their positions after these sharp jumps.
Some analysts warn of a potential correction of about 10% in prices, which could temporarily push gold towards the $3,600 per ounce boundary. Yet, they simultaneously point out that gold has demonstrated high resilience throughout the current bull run.
Since its launch in November 2022, the market has only recorded one continuous decline period lasting three weeks—between May 20 and June 3, 2024—when prices dropped by 2.8%. The largest weekly loss was last November, when gold declined by about 6.3% over two weeks before rebounding upward by 6% in the very next week.
Ultimately, the long-term outlook for the precious metal appears to remain strong, but profit-taking after this record surge is considered a logical step for investors.