Gold, often considered a safe-haven asset, witnessed a temporary pullback after recently touching all-time highs. The dip in prices, however, is being viewed more as a natural correction rather than a reversal in trend. According to experts, profit booking, triggered by the current global financial turbulence, has led to the recent slide. Yet, the underlying fundamentals continue to support a bullish outlook in the medium to long term.

Why Gold Prices Initially Soared

The recent rally in gold prices was primarily triggered by geopolitical uncertainty, most notably tensions around global trade policies. Investors shifted their funds into gold, seeking safety amidst fears of economic instability. Prices surged to lifetime highs, with COMEX gold crossing $3,100 per ounce.

• Heavy central bank buying bolstered sentiment.

• Investors preferred physical delivery of gold amid concerns about tariff-related shipment disruptions.

• Global uncertainty, particularly surrounding U.S. President Donald Trump’s trade policies, heightened demand.

These factors together made gold extremely attractive, but also led to a point where many considered it overbought, thus setting the stage for a short-term sell-off.

Profit Booking Brings Temporary Downside

As gold touched record levels, many investors chose to book profits. According to Bhavik Patel, Senior Commodities Analyst at Tradebulls Securities:

“Investors feel the risk/reward ratio is not favourable on the upside, so they are locking in gains.”

He also noted that some investors liquidated gold positions to offset losses in other trades, given the widespread market downturn that has wiped trillions off portfolios globally.

This profit-booking phase is common when an asset touches peak levels and is not seen as a red flag, but rather a pause before the next move up.

Experts Remain Bullish on Gold's Future

Despite the near-term volatility, analysts remain optimistic about gold's prospects. Prominent global institutions have made strong projections:

• Bank of America expects COMEX gold to reach $3,500 per ounce in the next two years.

• Goldman Sachs forecasts gold at $3,300 per ounce by the end of 2025.

Currently, gold is trading around $3,100 per ounce, which leaves room for further appreciation.

“There are plenty of reasons for gold not to correct,” Patel added. “Geopolitical conflict, trade war concerns, de-dollarization, and central bank accumulation are key drivers.”

Morningstar’s Contrarian View: A Bearish Forecast

However, not all are convinced of the sustained rally. Morningstar, a global research firm, has issued a bearish outlook.

• They predict a 40% drop in gold prices over the next few years.

• This would bring gold to around $1,820 per ounce internationally and between ₹55,000 to ₹56,000 per 10 grams in India.

• The forecast is based on expected increase in supply, driven by:

  • A rise in gold mining activity.

  • More gold recycling.

  • A possible drop in central bank purchases.

Morningstar believes that economic concerns, which drive short-term gold spikes, may wane, reducing investor appetite.

Analyst Rebuttal: A 40% Fall Is Highly Unlikely

Bhavik Patel strongly disagrees with Morningstar’s prediction. He argues that:

“A 40 percent fall in gold prices will only happen if there aren’t any trade wars, the global economy is booming, equity markets are peaking, and there’s zero geopolitical risk. That scenario is unrealistic at present.”

Patel points out that each of these conditions plays a major role in gold’s bullish narrative. Unless all these macroeconomic indicators align positively, a massive collapse in gold prices is improbable.

Physical Gold Demand and Central Bank Moves Still Key

There’s also been a notable shift toward physical gold rather than derivatives. Investors now prefer physical settlement over cash, especially due to uncertainties in the global supply chain.

• Central banks globally have ramped up their purchases, seeing gold as a hedge against currency depreciation.

• De-dollarization trends, where countries diversify away from the U.S. dollar, continue to support gold demand.

These structural factors provide a strong floor to gold prices, even if speculative interest cools temporarily.

What Lies Ahead: Consolidation Followed by Growth

In the short term, gold may consolidate and trade sideways, but long-term fundamentals remain intact. The ongoing:

• Geopolitical tensions

• Persistent inflation concerns

• Slow economic recovery in parts of the world

all create a conducive environment for gold to reclaim its highs and possibly exceed them.

Investors should also monitor:

• Central bank policies

• Interest rate decisions

• Currency movements

These will help determine the pace and trajectory of the next gold rally.

Investor Strategy: Should You Buy Gold Now?

Given the pullback, long-term investors could consider this a buying opportunity. While short-term corrections are normal, the long-term demand outlook remains robust.

Key takeaways for investors:

• Use dips to accumulate gold, especially for portfolio diversification.

• Focus on physical gold or sovereign gold bonds for stability.

• Be cautious with leveraged trades during this volatile period.

Conclusion

While gold has retreated from its recent highs, this move is being widely seen as a healthy correction, not a trend reversal. The macro environment, geopolitical backdrop, and central bank behaviour all support the possibility of a continued rally in the medium to long term. Even though contrarian views like that of Morningstar add perspective, the prevailing market sentiment leans towards optimism.

Long-term investors may benefit from the current consolidation phase, while short-term traders should tread with caution. As always, diversification and informed decision-making remain the keys to navigating such volatile times.

The Upcoming IPOs in this week and coming weeks are Aten Papers & Foam.

The Closed IPOs are  Infonative Solutions Limited, Spinaroo Commercial Limited,Retaggio Industries Limited.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in .Choice Broking FinX

Read more