Why an analyst sees the record-setting gold rally headed for a 38% crash in coming years

• Record-high gold prices

  could see a steep correction in the coming years, according to one analyst.

• There are long-term trends that could push bullion back to $1,820, Morningstar’s Jon Mills says.

• That implies a 38% decline for the metal from current levels.

Gold has become a surprise winner of the Trump trade as investors seek shelter amid the policy chaos, but there are longer-term trends that threaten to drag the metal back down to earth.

Jon Mills is an analyst at Morningstar with a particularly downbeat forecast for gold prices. While the rest of Wall Street is setting higher forecasts for bullion, he thinks that gold—which reached a fresh record-high this week—could ultimately tumble to $1,820 an ounce over the next five years.

That implies a 38% drop from its record high of over $3,000 and would wipe out its gains over the past 12 months.

Gold prices traded around $3,080 an ounce on Friday, a fresh all-time high.

Prices for the yellow metal have soared this year due to factors including geopolitical uncertainty, a more challenged outlook for the US economy, and expectations for higher inflation, which has piqued investor interest in safe-haven assets.

The restlessness in markets has made gold a standout asset in the opening months of Trump’s term.

But Mills believes that more secular pressures will weigh on gold in the coming years. He told Business Insider he sees three reasons prices will head lower over the long term.

High gold prices have encouraged producers to keep mining more gold, but higher supply will add downward pressure on prices in the coming years, Mills said.

According to data from the World Gold Council, gold mining has become increasingly lucrative in recent years. Average profit margins for gold miners hit $950 an ounce in the second quarter of 2024, the most profitable mining period since 2012.

According to the group’s analysis, the above-ground stock of gold also swelled to 216,265 tonnes in 2024, up 9% in five years.

Mills added that more gold is expected to be recycled in the coming years, which will also increase supply.

“Every person and their dog is trying to open a gold mine because it’s been profitable,” Mills said, pointing to Australia in particular as one of the world’s largest producers of gold. “I think you’ll see supply increase based on that.

Central banks and investors have been more interested in buying gold this year as a way of diversifying reserves and to seej shelter from the macro uncertainty.