The gold crash that lures bargain hunters worldwide

Over the past month, professional precious metals traders were getting increasingly nervous. As prices soared to new record highs near $4,400 an ounce, the metal was getting even more overbought. And another kind of gold rush is unfolding this weekend in Kyoto, where nearly one thousand professional gold traders, brokers and refiners are descending on Japan’s ancient capital for the largest annual precious metal conference, which begins on Sunday. The professionals, notwithstanding their caution in the recent run-up, are similarly enthused by the gold market.

On New York’s Comex futures market, interest in bearish put options on gold rose to some of the highest levels relative to bullish call options since the global financial crisis of 2008. The manager of a commodities-focused hedge fund expressed frustration that, despite being a long-term gold bull, he had failed to fully capitalise on the rally because he had started betting on a correction too soon.

Still, it remains challenging to find a gold bear among precious metals analysts whose forecasts have been bullish but not bullish enough over the past two years. When the London Bullion Market Association carried out a survey of analysts at the start of the year, almost every respondent expected prices to rise, but none thought it could trade above $3,300 during 2025.

Yet the gold market’s history gives some reasons for caution. In September 2011, when gold hit a high of $1,921 before falling back, traders and analysts who gathered that month for the annual LBMA conference were almost universally bullish. As it turned out, it would take another nine years before gold reclaimed that high.

The current surge in gold has been driven by a wave of central bank buying, which accelerated dramatically after sanctions on the Russian central bank in 2022, and fears about unsustainable levels of government debt around the world.

JPMorgan’s Shearer highlighted the possibility that central banks will take a step back from the market as the major risk to his bullish forecasts, which see gold averaging more than $5,000 by the final quarter of next year.In some of the world’s main gold-buying hubs, there was little sign this week that the fall in prices had dented their enthusiasm. Some dealers reported less interest after a hectic two months, but others had record sales. “I believe gold prices will keep rising in the long run,” he said. “I saw the current dip as an opportunity.”