Gold’s surge to record highs has investors wondering when the rally will end. After trading below $US3000 an ounce two years ago, gold has outperformed equities as investors seek safe haven amid inflation and geopolitical unrest. This week, gold surpassed $US4200 an ounce, driven by US-China tensions and expectations of further US Federal Reserve rate cuts. Central bank buying, particularly in Asia, has also supported prices.
While some expect the rally to continue into 2026, others warn of a possible correction. ANZ strategists noted the rally’s strength but suggested a “healthy correction” would be welcome given its rapid pace. This year’s surge is the strongest since 1979, drawing comparisons to the 1980s peak followed by a sharp crash. Experts suggest a 5 per cent fall over a week is highly possible before year-end.
Several factors could trigger a correction, including a reversal in Fed rate cut expectations, an improved US economic outlook, easing geopolitical tensions, or a stronger US dollar. Katana Asset Management portfolio manager Romano Sala Tenna noted the gold price had become “technically stretched,” making it vulnerable to profit-taking.
Perennial’s Natural Resources Trust portfolio manager Sam Berridge believes gold’s long-term outlook remains intact, driven by concerns about government fiscal responsibility and currency devaluation. National Australia Bank’s Ray Attrill added that only a major risk-off event, such as a US-China trade war, could cause a significant crash. Australian gold producers are expected to maintain profitability even if prices dip, due to currently large margins.
