38% Plunge In Gold Prices Over The Next 5 Years, Predicts Analyst: 'Be Careful Not To Project Current Spot Prices Unto Eternity'

Despite the recent surge to record highs, gold prices might be on the brink of a significant downturn, warn analysts.

What Happened:  Jon Mills, a Morningstar analyst, anticipates a potential 38% tumble to $1,820 an ounce in the next five years, reported Business Insider. “I think you have to be careful not to project current spot prices unto eternity or over the long term,” predicted Mills.

Geopolitical uncertainty, a challenging U.S. economic outlook, and higher inflation expectations have driven gold prices to new heights. Investors have sought solace in safe-haven assets like gold amid these conditions.

However, Mills identifies three primary factors that could trigger a downward shift in gold prices. Firstly, he expects the market supply of gold to increase, spurred by high gold prices that encourage more mining and recycling. According to the World Gold Council’s data, the above-ground gold stock has increased by 9% over the past five years, suggesting that gold mining has grown more profitable.

Secondly, Mills foresees a drop in gold demand. Despite recent interest from central banks and investors, a World Gold Council survey shows that 71% of central banks anticipate their gold holdings to either remain constant or decrease in the upcoming year.

Lastly, Mills highlights indications that the gold industry is approaching a peak, as evidenced by the surge in M&A activity and the growth of gold-based funds, both historical indicators of a market peak.

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Why It Matters: The recent surge in gold prices has been driven by escalating trade tensions and uncertainty surrounding U.S. tariff policies, including President Donald Trump‘s proposed 25% tariffs on imported cars and auto parts and a new round of reciprocal tariffs set to take effect on April 2.

Contrary to Mills’ predictions, other Wall Street forecasters like Bank of America and Goldman Sachs anticipate a continued rise in gold prices in the short term.

Renowned economist Peter Schiff attributes the record-high gold prices to declining trust in the U.S. dollar and the certainty of inflation exceeding 2%.

However, the potential increase in gold supply and decrease in demand, as predicted by Mills, could lead to a significant drop in gold prices over the next five years. KCM Trade chief market analyst Tim Waterer echoed a similar sentiment and stated, "If the tariff announcements this week are not as severe as feared, then the gold price could start to backtrack as profit-taking from the highs may be triggered."

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.