Gold prices are rising too fast, is it worth worrying about?

Gold continues to benefit from rising geopolitical uncertainty and a new easing cycle from the US Federal Reserve (FED), analysts say. The latest rally also shows that the market is experiencing solid momentum driven by fear of missing out (FOMO).

December gold futures last traded at $2,732.20 an ounce, up nearly 1% on the day. The precious metal closed the week up 2%.

Naeem Aslam, chief investment officer at Zaye Capital Markets, said the growing FOMO sentiment in the gold market could be a sign of a "bubble."

“The strong rally in gold is partly driven by fear of missing out. Any hawkish shift from the Fed or profit taking could trigger a correction,” he told Kitco News.

Daniel Ghali, senior commodity strategist at TD Securities, also pointed to the growing risks in the gold market, noting that much of the current momentum appears to be coming from the over-the-counter (OTC) market, which is difficult to track.

He added that it is difficult to judge how sustainable this rally is: “There is an election season underway, which could explain some of the increased interest in gold. Could the recent rise in gold also be due to reduced selling demand, causing even small inflows to have a big impact on prices?”

While analysts can't always pinpoint the key drivers in the market, they all agree that fundamental support remains strong behind the new momentum.

“Geopolitical uncertainty, sluggish economic growth in key regions, policy shifts by central banks towards lower interest rates and most recently the news surrounding the US presidential election have all contributed to this situation,” said Ricardo Evangelista, senior analyst at ActivTrades.

Jesse Colombo, an independent precious metals analyst and founder of the BubbleBubble report, said he sees no risk in the market as this rally comes after a period of consolidation.

"The gold rally is just getting started. Retail investors are not fully involved yet. I believe the real FOMO is still ahead as gold prices approach $3,000 an ounce," said Jesse Colombo.

A solid close above $2,700 an ounce later this week would take gold prices towards $3,000 an ounce, he added.

Rich Checkan, president and CEO of Asset Strategies International, agrees and is optimistic about gold's future.

"This rally is just getting started. Investors should stop waiting and get in the market," the expert said.

Those concerned about a bubble in the gold market need to look at the broader context, Checkan added, pointing out that there are few options for investors: “If you have spare cash, where do you put it when interest rates or short-term bonds are falling? Just look at the charts – gold prices are only going to go higher.”