? The beginning of the end for the gold rush? After a 52% surge that saw gold reach an all-time high of USD 4.4k per ounce, the precious metal is experiencing a sharp correction that some analysts believe marks the beginning of a more significant downturn. As of publication, gold is trading at just over USD 4k per ounce, down 8% from its peak last week. The sell-off has been dramatic, with one session last week seeing gold tumble more than 5% in what marked the steepest percentage decline since April 2013.

A “mini-bust” on the horizon? John Higgins, the chief markets economist at Capital Economics, was cited as saying that the recent pullback is the start of a downward trend that could erase a significant portion of this year’s gains, predicting that the price of gold will fall to USD 3.5k per ounce by the end of 2026 — a decline of more about 13 % from current levels.

The macroeconomic firm’s bearish outlook is the result of four main concerns:

#1- The rally has run too far. First, while gold has pulled back from its peak, it remains up 50% YTD, and even a drop to USD 3.5k would still represent a 30% gain since the beginning of 2025. This suggests that the metal may have gotten ahead of itself.

#2- Central bank appetite may wane. Central bank buying has been a major driver of gold’s rally in recent years, with the share of gold in total reserves surpassing 20%. However, Capital Economics doesn’t expect reserves to continue rising to the levels seen during the high-inflation of the 1980s.

#3- Cooling demand from China. China’s roaring stock market could “reduce the allure” of gold among investors in the country, with asset managers potentially hesitant to buy more gold if it continues to underperform.

#4- The “debasement trade” may be overblown. Higgins doubts that concerns about currency debasement are driving as much gold demand as some believe. The USD has remained stable against other currencies in recent months, while the 10-year US Treasury has rallied, suggesting investors haven’t lost confidence in USD-denominated assets. Instead, Higgins suggests the surge from early August to mid-October was “largely driven by FOMO.”

What’s driving the current sell-off? Chinese and US officials hashed out a framework for a trade agreement over the weekend that would pause steeper US tariffs and Chinese export controls on rare-earths, with US President Donald Trump and Chinese President Xi Jinping set to meet. This progress in trade talks is reducing demand for safe-haven assets like gold. Kelvin Wong, senior market analyst at Oanda, explained, “The fuel for this short-term correction in gold is a readjustment of safe-haven instrument towards more response instrument like global equities due to trade optimism.”

Analysts also say the sell-off followed weeks of heavy buying that pushed gold to overheated levels, prompting investors to lock in gains. The USD has strengthened against rival currencies, making gold more expensive for holders of other currencies. The end of the Diwali festival in India, the world’s second-largest gold consumer, has reduced physical demand.

But the bulls aren’t giving up yet: Despite the bearish short-term outlook from some quarters, not all analysts are turning their backs on gold. Wong noted that while the metal faces near-term downside pressure from position adjustments by short-term traders, “the fundamentals are still bullish for gold.” ING and ANZ analysts echoed this sentiment, suggesting that “the recent declines may provide [a window] for central banks to ramp up purchases,” with ANZ predicting that the bullion will reach USD 4.6k per ounce by June 2026.