Gold is a bright star in the financial market as it continuously sets new records, but there are long-term trends that threaten to pull gold prices back to earth.
The world gold price on the morning of March 31, Vietnam time, at one point skyrocketed to 3,097.4 USD/ounce after reaching 3,080 USD/ounce on March 28, setting the highest peak in history.
However, Jon Mills - an analyst at Morningstar, a leading US-based financial research and analysis company - has a particularly pessimistic forecast for gold prices. He said gold could plummet to 38% in the next five years, down to just $1,820 an ounce.
Speaking to Business Insider, Jon Mills pointed out three key factors to explain this pessimistic forecast.
Gold supply increases sharply, creating downward pressure
Rising gold prices have stimulated gold mining companies to boost production and higher supply will create additional downward pressure in the coming years.
According to the World Gold Council (WGC), gold mining has become increasingly profitable in recent years. The average profit margin of gold miners reached 950 USD/ounce in the second quarter of 2024, the most profitable mining period since 2012.
Total gold reserves that have been exploited and are available on the ground in various forms have reached 216,265 tons in 2024, up 9% over the past 5 years.
In addition, the amount of recycled gold is also increasing significantly. Jon Mills emphasized: Everyone wants to open a gold mine because the profit is too attractive. This will cause a sharp increase in supply in the coming time and may cause gold prices to decrease, because the law of supply and demand always dominates the market".
Gold demand shows signs of weakening
In 2024, central banks around the world net bought 1,045 tons of gold, marking the third consecutive year of over 1,000 tons.
Capital flow into gold ETFs also reached 9.4 billion USD in February 2025, the highest level in nearly 3 years.
But there are signs that the world's demand for gold is starting to weaken. A WGC survey shows that 71%, of central banks expect to keep or reduce gold reserves next year.
Jon Mills warned that the factors driving current gold prices are unlikely to last long. This happened in 2020, when the pandemic pushed gold prices up but then quickly declined.
Signs that the market is about to peak
Another sign that gold may be about to peak is the explosion of M&A (mergers and acquisitions) in the gold mining industry. S&P Global Market Intelligence recorded that M&A deals in the industry have increased by 32% compared to last year - a common trend when the market is about to reverse.
In addition, the number of gold-based investment funds is also increasing rapidly - a sign that has appeared before previous price declines.
Contrary to Jon Mills' forecast, many major financial institutions still believe that gold prices will continue to increase. The Bank of America has just raised its gold price forecast to 3,500 USD/ounce in the next 2 years, while Goldman Sachs predicts that gold could reach 3,300 USD/ounce by the end of this year.
However, Jon Mills warned: We cant hypot issue that gold prices will continue to rise. History has proven that after each hot increase, gold prices have strong adjustments".
