Has gold's rally come to an end?

Spot gold on Tuesday tumbled 6.3%, the steepest fall in more than a decade, and continued to decline Wednesday to a near two-week low of $4,054.

"Given the aggressive move to the upside over the course of the last several weeks, it's not completely surprising to us to see a bit of profit taking," said David Meger, director of metals trading at High Ridge Futures, as reported by Reuters.

Bullion has been a sought-after asset this year, gaining 57%, amid low-interest rates, weakening U.S. dollar, and rising trade tension between the U.S. and China.

Even with recent strong drops, analysts say that it is too early to say if gold’s bull trend has ended, especially as investors keep their eyes on next week’s meeting between U.S. President Donald Trump and Chinese President Xi Jinping.

"While corrections are natural, it is worth pointing out that many investors missed out on the big rally," said Fawad Razaqzada, an analyst of Forex.com, as reported by The Business Times.

"Soon, they may step in to buy the dip, which should keep the sell-off contained."

Charu Chanana, chief investment strategist of Saxo Bank, described the pullback as a "normal reset" following the metal’s powerful surge, with gold miners likely to suffer more acutely.

The short-term plunge was caused by overbought conditions, subdued Indian demand and a firmer U.S. dollar.

"None of this means the precious metals story is over. In fact, these are healthy developments, helping to cool what had become an overheated trade and preventing the rallies from turning into a bubble."

A jeweller displays a bar of gold at his shop in Kuwait City on October 21, 2024. Photo by AFP

Other analysts say that the fundamentals remain strong for gold. Strategists of Swiss private bank Lombard Odier said macroeconomic and geopolitical uncertainties will likely "remain conducive to further gold demand."

They upheld a bullish stance on gold, lifting their 12-month target to US$4,600 per ounce.

"The gold market is technically overbought, but constrained supplies and strong demand support prices. Lombard Odier remains overweight gold, and has taken partial profits following the recent rally."

Some experts, however, cautioned that further slides are expected as bullion has achieved record prices.

"The surge in gold prices to a record high at record pace, may have stretched short-term valuations and risk-reward," according to strategists of Singapore-based lender OCBC.

Sentiment and speculative positioning are starting to look elevated, and there is a risk that gold may potentially be vulnerable to consolidation, they added.

"That said, we remain constructive on gold outlook. Nominal rates are likely to trend lower as the Fed eases, while central-bank and institutional demand remain solid," they said.

Saxo Bank remains optimistic about gold, saying that the corrections are necessary for investors to take a break, getting ready for a recovery.

"We maintain a bullish outlook for gold and silver into 2026, and following a much-needed correction/consolidation, traders will likely pause for thought before concluding the developments that drove the historic rallies this year has not gone away," the bank said in a note.