Gold has taken a sharp downturn, possibly entering bear market territory, but some seasoned market analysts maintain hopeful long-term projections.
On Tuesday, gold prices slid, with spot prices dropping up to 2% before settling at around 1.5% lower at $4,335.97 an ounce, while futures fell approximately 2% to $4,317.80. Silver prices also dropped during this period.
Currently, gold is down about 21% from its peak in late January, where it reached $5,594.82, marking a significant decline.
For many experts, this recent dip is seen as a momentary setback rather than a fundamental shift in gold’s value. Ongoing geopolitical uncertainties, strong demand from central banks, and a potential weakening of the US dollar are still believed to bolster gold’s underlying performance. Historically, investors consider gold to be a safe haven during times of instability.
Ed Yardeni, president of Yardeni Research, mentioned in an email that he adjusted his end-of-year forecast for gold down to $5,000 per ounce from $6,000, while still maintaining an optimistic view of $10,000 by the end of 2010. This forecast is notably higher than the current market price.
This downturn seems to be occurring as investors adjust their portfolios, possibly linked to a stronger dollar and signs of diminishing tensions regarding US-Iran relations after President Trump announced a pause in planned military actions on Iran’s energy infrastructure.
Market observers believe the dollar’s strength may lead to profit-taking in gold investments.
Gold price since the beginning of the year.
Since the onset of the conflict on February 28, the dollar index has increased by about 3%.
Even with this short-term weakness, many strategists regard the drop in price as an opportunity rather than a significant turning point.
Justin Lin, investment strategist at a leading firm, noted that the decline seems tied to temporary factors like rising interest rates, portfolio adjustments amid a shaky stock market, and a degree of complacency regarding ongoing tensions in Iran.
Interestingly, Lin emphasized that his positive outlook on gold does not hinge on any geopolitical risk premiums.
“Instead, my view is informed by ongoing geopolitical uncertainty, steady demand from central banks, and consistent investments from Asian gold ETF buyers,” he said.
This structural demand—especially from emerging market central banks aiming to diversify their reserves—is anticipated to provide a solid price foundation. Lin also mentioned it’s possible that central banks may increase their buying in response to recent market fluctuations, which could help steady gold prices.
Standard Chartered maintains a positive outlook, highlighting similar long-term drivers. As Rajat Bhattacharya, a senior investment strategist at the bank, shared via email, “We remain optimistic about gold for the long term,” supported by strong demand from emerging market central banks and the need for investor diversification due to geopolitical risks.
The bank forecasts a rebound in gold prices to around $5,375 per ounce over the next three months, with technical support around $4,100, once the current deleveraging trend eases.
With market expectations leaning towards the Federal Reserve eventually cutting interest rates, a weaker US dollar could be a significant factor in economic recovery.
“A declining dollar should once again uplift gold prices,” Bhattacharyya noted.
