After a dazzling rally that pushed gold prices to a record $4,378 per ounce earlier this month, the yellow metal has dipped back to $4,100—to some, a warning sign, but to others, a setup for what could be the next leg in a powerful, fundamentally driven uptrend.
The Gold Rally That Got Popped — But Not For Long?
Gold's sharpest single-day drop in five years earlier this week reignited bubble talk, with some calling time on the metal's historic run.
Robin Brooks, senior fellow at the Brookings Institution and former chief economist at the Institute of International Finance, called the move a textbook case of macro-driven exuberance.
"The crazy rise in gold prices began after Powell's dovish speech at Jackson Hole on Aug. 22. Thirty percent later, this bubble was popped by the IMF/World Bank meetings last week, where lots of people got together and said: ‘This is nuts,'" Brooks posted on X.
He argued that markets are rotating between safe-haven assets in what’s become a “debasement trade,” where bubbles form and burst across asset classes. Gold, he said, had become "massively overbought."
Still, not everyone's convinced the rally is over. Some commodity analysts believe this correction is merely a pause as the metal’s historic rally still has plenty of fuel left in the tank.
In a note to clients shared Thursday, Goldman commodity analysts Lina Thomas and Daan Struyven said they remain “structurally bullish” on gold, maintaining their forecast of $4,900 per ounce by end-2026, or about 20% upside from current prices near $4,100.
Why Did Gold Pull Back?
According to Goldman Sachs, the correction, which hit during Tuesday's session, likely stemmed from a mix of speculative unwinds and market mechanics.
With no updated CFTC data since late September due to the U.S. government shutdown, Goldman turned to COMEX open interest as a proxy for investor positioning.
That data suggests some managed money players exited long positions, while complex call option structures — including "knockout" clauses that void contracts during sharp moves — may have accelerated the selloff.
Adding to the turbulence: silver, which fell 11% since Friday, dragging gold lower through cross-metal positioning unwinds.
Silver's sharp drop came as lease rates in London plunged, suggesting a recent price spike tied to regional shortages was easing, pulling more metal into the city and easing local tightness.
Central Banks And Institutional Buyers Are Driving The Gold Rally
Despite the price drop, structural buying hasn't let up. Goldman believes central bank purchases accelerated in September and October—following the usual post-summer seasonal trend—with China estimated to have bought 10 of the 21 tonnes in August alone.
Gold ETF inflows – in funds like the SPDR Gold Shares (NYSE:GLD) or the iShares Gold Trust (NYSE:IAU) – also picked up in recent weeks, supported by the outlook for Federal Reserve rate cuts.
Private wealth and asset managers are also expressing renewed interest in gold as a long-term hedge, according to Goldman's client conversations.
Most of this money is slow-moving and not reflected in fast-twitch ETF metrics. Institutions operate on multi-quarter investment cycles.
In 2020, only 30% of U.S. institutional investors held any gold at all, and those that did had allocations below 2%, according to 13F filings. That leaves significant room for growth.
"If such private investors were to seek stores of value outside the financial system amid global macro uncertainty… even modest reallocations from global bond and equity portfolios could substantially raise prices," Goldman said.
22V Research Sees Gold at $5,000—And Soon
Adding weight to the thesis, 22V Research's analyst Colin Fenton offered a similarly bullish long-term view.
He expects gold to hit $5,000 and silver to reach $65 before the end of 2026—if not earlier.
"Significantly higher gold and silver prices most likely lie ahead," Fenton said, yet warned that the journey won't be smooth.
He called the recent correction a potential buying opportunity and indicated that the volatility reflects physical market realities, not just paper trading.
"To be crystal clear," Fenton added, "we expect spot gold and silver prices to advance by at least another +25% from current levels within the next 14 months."
And because of the operating leverage embedded in miners' earnings, he believes gold miners—tracked by ETFs like VanEck Gold Miners ETF (NYSE:GDX)—could see 50%+ gains over the same period.
"This is a historic cycle for precious metals," Fenton said. "But from here the forward price paths cannot and will not be smooth. High price volatility must be expected and managed."
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Image created using artificial intelligence via Midjourney.
