Gold prices experienced a significant dip this week, falling below $4,000 per troy ounce, yet several prominent financial institutions maintain bullish long-term projections for the precious metal. The recent decline, which saw spot gold trade below $3,980 and December futures drop more than 3%, is attributed to market optimism surrounding potential progress in U.S.-China trade negotiations.
This shift prompted a sell-off in safe-haven assets, with analysts and traders linking the withdrawal of positions to public signals of advancement in the trade dispute. Expectations are high for a meeting between President Donald Trump and President Xi Jinping later this week.
Despite the immediate downturn, major investment banks are reiterating confidence in gold’s long-term value. UBS Global Wealth Management Chief Investment Officer Ulrike Hoffmann-Burchardi stated that gold remains an effective portfolio diversifier. She added that “higher gains towards our optimistic scenario of $4,700 per ounce are still possible” if adverse macroeconomic or political developments emerge.
Bank of America reiterated its recommendation for a long position in gold, projecting the price could reach $6,000 per ounce by mid-2026. Goldman Sachs also adjusted its estimates, now forecasting gold to hit $4,900 per troy ounce by the end of next year, an increase from its previous prediction of $4,300.
The current correction follows a period of robust gains for gold. Last week’s price adjustment interrupted the largest annual climb for gold in over 40 years and ended a nine-week consecutive upward streak, reflecting a market recalibration after weeks of strong safe-haven buying.
Historically, gold has served as a key refuge asset during times of economic and geopolitical uncertainty. Market observers note that corrections are not unusual within sustained bullish trends. Bespoke Investment Group indicated that since 1975, there have been 16 similar reversals, some proving to be temporary peaks, while others occurred within broader long-term uptrends.
Analysts suggest that a decrease in safe-haven demand, driven by expectations of stability or agreements between major global powers, can lead to rapid price retreats. However, they also emphasize that new adverse political episodes or shifts in macroeconomic factors could quickly restore buying pressure on gold, pushing prices toward their higher targets.
UBS has advised investors with an affinity for gold to consider increasing their holdings if they are currently below their optimal allocation. This strategy suggests utilizing price dips as opportunities to average down within diversified portfolios.
Overall, while the market experiences significant short-term volatility, the medium-term outlook from leading financial institutions largely remains bullish. Investors and asset managers are encouraged to assess their risk tolerance and investment horizons before making decisions based on recent market movements.