Gold prices have soared to record highs in recent months. In the international market, the price of gold has reached as high as $3,080 per ounce — the highest ever recorded. However, John Mills, senior analyst at Morningstar, has warned that this price is unlikely to be sustainable in the long run.
Speaking to Business Insider, Mills predicted that over the next five years, gold prices could drop to around $1,820 per ounce, which would be a decline of nearly 38% from current levels.
According to Business Insider, Mills highlighted three key reasons behind the possible drop:
Rising global supply,
A potential decline in demand, and
Clear signs that gold is currently overvalued.
Mills explained that the recent surge in gold prices has made gold production increasingly attractive, triggering a global rush to open new gold mines. Data from the World Gold Council shows that in the second quarter of 2024, gold producers were earning an average profit of $950 per ounce — the highest since 2012. As profits rise, more mines are being opened and recycled gold volumes are increasing, he said.
Citing Australia as an example, Mills quipped, “These days, it’s not just people, even their dogs are opening gold mines.”
On the demand side, central banks around the world purchased 1,045 tons of gold in 2024. In February alone, $9.4 billion flowed into gold-based ETFs, according to the World Gold Council. However, a recent survey by the Council found that 71% of central banks do not plan to increase their gold reserves in the near future — a trend that, according to Mills, raises concerns about long-term demand.
He referenced the post-COVID gold price surge as an example of how quickly market euphoria can reverse.
Mills also pointed to current market activity as a warning signal. He noted the sharp rise in mergers and acquisitions in the gold industry and the growing pressure on gold-backed funds as indicators that the market may already be near its peak.
According to S&P Global Market Intelligence, M&A activity in the gold sector rose by 32% in 2024. Mills argued that when investment funds pile in and companies engage in exuberant large-scale deals, it’s often a sign of a market top.
“The excitement surrounding gold and the drivers behind its recent price surge are unlikely to last over the long term,” Mills said. “Investing at current levels assuming they’re permanent could be risky.”
Meanwhile, Bank of America has projected that gold could reach $3,500 within two years if inflows continue, while Goldman Sachs expects gold to hit $3,300 by the end of this year.
