Recession talk and China demand keep gold forecasts strong. Picture via Getty Images
For more than two weeks, it felt like gold could do no wrong.
Prices were punching through record highs, miners were minting it, and investors were high-fiving each other over their gains.
But then Wednesday, April 23 rolled in like a rogue wave and absolutely knocked the wind out of the sails.
After spot gold briefly kissed a record $US3,500 an ounce on Tuesday, it dropped back to around $US3,338 by Wednesday afternoon.
ASX traders took the cue to cash out on their gold stock holdings, and the sell-off was brutal.
But there was more to the bloodbath than just a gold price hiccup.
A lot of the ASX miners were already looking pretty inflated after a big couple of weeks.
Take Evolution Mining (ASX:EVN) – it has shot up almost 40% in just nine sessions. That kind of run-up doesn’t leave much room for error.
So when gold wobbled, plenty of investors rushed to lock in gains before the party turned into a hangover.
Even solid quarterly results couldn’t save them.
Genesis Minerals (ASX:GMD), for instance, beat expectations with its March numbers – better grades, better recoveries, all the good stuff – but still got slapped with a downgrade from Macquarie.
Genesis was already up by about 80% this year, and Macquarie analysts reckoned it had simply run too far, too fast. Time to cool the jets.
But zoom out for a second, and the picture is actually looking very gold-friendly.
JPMorgan, not exactly known for its bold predictions, now reckons gold could blast past US$4,000/oz by mid-2026.
JP is pinning it on rising recession risks, worsening US-China trade tensions, and a global economy that’s starting to wobble under the weight of tariffs.
Goldman Sachs is also in the gold bull camp. The bank reckons US$3,700 by year-end, and US$4,000 by mid 2026.
“We view the gold price rally as structurally supported and less exposed to sharp near-term liquidation risk,” said Lina Thomas at Goldman.
“Thus, we see current levels as a tactically attractive entry point.”
UBS is tossing around similar numbers.
If the wheels really fall off the global economy, UBS says US$4,500 isn’t off the table.
UBS strategist Joni Teves reckons there’s still heaps of room for more investors to jump on the gold train, and says not that many have piled in just yet.
Well, there’s a storm brewing, and uncertainty is thick in the air. And when things get hairy, gold tends to shine.
Investors are running from other havens like the US dollar and bonds, and they’re piling into bullion instead.
You’ve also got central banks snapping up gold, with China leading the charge.
China’s big insurers are now allowed to stuff 1% of their assets into gold. That alone could add 255 tonnes of demand per year, analysts estimated.
And Citi reckons the demand coming out of Asia is just getting started.
“We expect China gold import to rebound strongly over the coming months on the fresh import quota,” said Citi analyst, Kenny Hu.
Wednesday’s carnage – yeah, it stung, no doubt about it. But it also might be opening the door for something bigger.
Because while the sell-off shook out the froth, the underlying drivers for gold haven’t changed, they’ve actually gotten stronger.
Recession risk, central bank demand, geopolitical tension, it’s all pointing in one direction.
And that’s the thing with gold.
It’s not always about today. It’s about where the world’s headed next.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision.
Investor Guide: Gold & Copper FY2025 featuring Barry FitzGerald
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