Remember when everyone and their crypto-bro cousin was suddenly a gold expert? Yeah, well, that party might be winding down faster than a TikTok trend.
Gold just took a 3% nosedive on Monday, and the smart money at Capital Economics thinks this isn’t just a little hiccup—it’s the beginning of what they’re calling a “mini-bust.” Ouch.
Here’s the deal: Gold has been absolutely crushing it this year, up 50% and hitting record highs like it was auditioning for a Netflix documentary about market bubbles. But now the analysts are saying “hold up” and predicting it’ll drop to $3,500 an ounce by the end of 2026. That’s a 12% haircut from current levels, which honestly isn’t terrible considering how wild this ride has been.
So what’s behind gold’s potential reality check?
1. The FOMO Factor
Turns out, a lot of this year’s gold rush was just good old-fashioned fear of missing out. When everyone’s talking about something at dinner parties, you know the smart money is probably already looking for the exit. John Higgins from Capital Economics basically called it: this looks more like a FOMO-fueled bubble than a fundamental shift.
2. Central Banks Are Getting Picky
Central banks have been gold’s biggest cheerleaders lately, but they might be reaching their limit. They’ve already got over 20% of their reserves in gold—that’s getting close to 1980s levels when inflation was eating everyone’s lunch. Don’t expect them to keep loading up indefinitely.
3. China’s Having Second Thoughts
China’s stock market is suddenly looking sexy again, which means Chinese investors might not need gold as their safety blanket anymore. When you’ve got other shiny objects to chase, gold starts looking a bit… boring.
4. The “Debasement Trade” Might Be Overrated
All that talk about the dollar collapsing and everyone fleeing to gold? Yeah, the dollar is doing just fine, thank you very much. Treasury bonds are still popular at parties, and there’s no mass exodus from dollar-denominated assets. Sometimes a cigar is just a cigar, and sometimes a gold rally is just a gold rally.
Look, gold isn’t going to zero or anything dramatic like that. Even if it drops to $3,500, that’s still a 30% gain for the year—not exactly a disaster. But if you’ve been riding this wave thinking it would never end, well, welcome to markets 101.
The bottom line? Gold’s record-breaking year was fun while it lasted, but when the fundamentals don’t match the hype, gravity tends to win eventually. If you’re holding gold, don’t panic—but maybe don’t expect another 50% year anytime soon.
After all, what goes up in a FOMO frenzy usually comes down when people remember that trees don’t actually grow to the sky.