Gold at $4,000 Can’t Last, Why I Expect a Correction soon

By Ray Claudio, October 2025

Gold’s stunning rally above $4000 per ounce has been one of 2025’s defining market stories. For months, bullion has surged on safe haven demand, central bank buying, and persistent fears of economic slowdown. But as investors debate whether the metal can go even higher, cracks are starting to appear beneath the surface.

In my view, gold’s price in the $4000s is unsustainable. Several key factors, from slowing jewelry demand to cooling central bank purchases, point to a market running on momentum more than fundamentals.

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Gold Price Outlook: The Rally May Be Running Out of Steam

At the heart of the rally is a perfect storm of investors hedging against inflation, geopolitical uncertainty, and a volatile stock market. Those fears fueled a 60 percent rise in gold prices since January, according to The Guardian, which called last week’s 5 percent sell off the metal’s “biggest one day fall since 2020.”

But for all the headlines, the underlying demand picture looks weak. While gold’s investment demand has soared, its biggest real world market, jewelry, has faltered badly under the weight of record prices.

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Jewelry Demand Is Cracking Under Record Prices

Jewelry traditionally accounts for nearly half of all global gold demand, according to the World Gold Council (WGC). Yet the latest data show this foundation is eroding fast.

In its Gold Demand Trends Q2 2025 report, the WGC found that jewelry consumption fell 12 percent in China and 8 percent in India, the two largest gold buying nations, as record prices discouraged retail purchases. Reuters reported in September that consumers are opting for lighter designs or alternative metals, while Bloomberg noted in August that global jewelry sales have softened amid weak household spending and inflation pressures.

That aligns with what I’ve heard from people in the industry: customers simply aren’t buying gold jewelry the way they used to. And with prices this high and consumer fear rising, it’s unlikely the average household can support gold’s largest market segment anytime soon.

“While gold’s investment appeal gets headlines, jewelry still makes up nearly half of total demand,” the WGC reminds investors. “At current price levels, that support is waning.”

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Investment Demand Alone Cannot Hold the Market

Even as jewelry demand weakens, investment flows have kept prices elevated for now. Exchange traded funds, hedge funds, and retail traders have all piled into gold as a hedge against uncertainty. But this demand is highly price sensitive and can reverse quickly.

The World Gold Council’s Central Bank Gold Reserves Survey 2025 found that while many central banks remain net buyers, the pace has slowed compared to 2023 and early 2024. Bloomberg Intelligence warned in July that, with real yields rising and inflation fears cooling, “gold faces a weaker macro backdrop.”

That matters because speculative investment demand tends to follow, not lead, price moves. Once momentum fades, those same investors often head for the exits, accelerating a downturn rather than cushioning it.

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Central Banks Are Slowing Their Gold Buying Spree

One of the biggest tailwinds for gold over the past two years has been record level central bank accumulation. Countries like China, Turkey, and India collectively bought hundreds of tonnes of bullion to diversify away from the US dollar.

Now, even that demand appears to be cooling.

The World Gold Council’s Q3 2025 preview shows global central bank purchases totaled roughly 78 tonnes in September, well below the 120 to 140 tonne monthly average seen in 2023 and early 2024. [World Gold Council, 2025]

Bloomberg (October 14, 2025) reported that “the pace of central bank gold accumulation has eased in Q3, as several emerging markets reached reserve targets and record high bullion prices deterred further buying.”

IMF data confirms that while China’s central bank added about 5 tonnes in September, it recorded zero purchases in October so far. Turkey has paused entirely since July, while Kazakhstan and Uzbekistan have become net sellers, the lowest two month net total in over a year.

“Even the world’s biggest gold buyers are tapping the brakes,” says the WGC. “At these prices, further reserve diversification appears limited.”

This cooling in sovereign demand removes one of the last non speculative supports under the market.

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Consumer Fear and High Prices Do Not Mix Well

The macro picture doesn’t help. With layoffs rising and trade war rhetoric resurfacing, consumers are becoming more cautious. The OECD’s Economic Outlook 2025 projects a slowdown in global consumer spending as real incomes stagnate and households rebuild savings.

“Consumer spending is projected to decelerate in late 2025 as real income growth remains subdued and precautionary savings rise,” the OECD warned.

Even though fear can boost gold temporarily, weak consumer finances reduce actual physical buying, especially for jewelry. As one metals analyst told Bloomberg, “Gold thrives on fear, but fear alone doesn’t pay for a necklace.”

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History Suggests Parabolic Moves Do Not Last

The current run up bears uncomfortable similarities to past peaks. When gold hit record highs in 1980 and 2020, both rallies were followed by sharp corrections. In each case, prices fell 20 to 50 percent within two years.

In 1980, gold dropped from $850 to under $400 as inflation stabilized. In 2020, it fell about 20 percent once vaccine optimism shifted capital back into equities. As The Guardian pointed out this week, today’s pullback “echoes those earlier reversals driven by profit taking and fading panic.”

History doesn’t repeat perfectly, but it often rhymes.

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Gold Market Analysis: What Comes Next

Looking ahead, the fundamentals point to a correction rather than a crash, perhaps a retracement to the $3200 to $3500 range as speculative flows unwind and jewelry demand struggles to recover.

If central bank buying remains muted and consumer demand fails to return, gold could see a sustained period of consolidation rather than another leg higher.

While a short term bounce is always possible, the gold bubble may already be showing signs of strain. As with all crowded trades, when everyone’s already in, there’s often only one direction left to go.

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Sources

• World Gold Council – Gold Demand Trends Q2 2025

• World Gold Council – Central Bank Gold Reserves Survey 2025

• IMF International Financial Statistics, Sept–Oct 2025

• Bloomberg Intelligence, July 2025

• Bloomberg, October 14, 2025

• Reuters, September 2025

• OECD Economic Outlook 2025

• The Guardian, October 21, 2025: “Gold on Track for Biggest Fall Since 2020”