Gold Prices Drop: Is It the End of the "Gold Bubble" or a Healthy Adjustment?

1. Why Did the Recent Decline Occur?

1-1. Actual Price Measurement: Reversal from All-Time High

• 10/16-20: Gold reached the historical high range (around $4,300).

• 10/21-24: Due to profit-taking and pre-indicator adjustments,it fell to around $4,100. Continuous data from the London Fix also confirms this, showing a drop from 4,252.75 on the morning of the 20th to 4,104.40 on the afternoon of the 24th. GoldSilver

1-2. News Flow: Profit-Taking and Pre-Event Caution

• Before inflation statistics and U.S. interest rate forecasts, there was a closing of positions that had significantly increased since the beginning of the year (so-called "profit-taking led decline"). Multiple reports echoed this tone. Reuters+2Reuters+2

1-3. Structural Factors: Supply and Demand Remain Tight

• Demand is strong in 2025. Central bank net purchases and investment demand (ETF inflows) provide support. Global demand in 2024 is near a record high, with uncertainty continuing to provide support in 2025. Reuters

• On October 8, it finally surpassed the $4,000 mark. With the momentum of setting a new record high for the 45th time this year, investment demand, geopolitics, and dollar trends are the drivers. The recent decline can also be seen as a "cooling of overheating." World Gold Council

Summary:Short-term is a reaction to overheating, long-term is the strength of structural demand—this is the "two-layer structure" of the current market.

2. What is Different Between Japan and Overseas (Dollar-Based)?

2-1. Yen-Based Prices are in a "Different World Level High Range"

• Domestic over-the-counter prices have been updated to the 22,000 yen/g range. Tanaka Precious Metals' published price on 10/24 was 22,328 yen/g (including tax). Due to the dual effect of yen depreciation and global rise, Japan's perceived price remains at peak levels. Tanaka Gold

• As a symbol of overheated demand, the largest domestic company temporarily halted sales of small gold bars. Bloomberg

2-2. Impact of the Yen Exchange Rate

• There was a phase in early October where the yen fell to the 150 yen range, further pushing up Japan's gold prices. The volatility of the yen surrounding political and monetary policy expectations has an amplifying effect on Japan's gold prices. Financial Times+1

2-3. Overseas, "Dollar, Interest Rates, Geopolitics" Take Center Stage

• In overseas markets, prices react quickly to news about U.S. inflation, interest rate trends, the dollar index, and geopolitical risks.Position adjustments before events→reboundare typical price movements. Reuters+1

3. Three Scenarios for the Next 6-12 Months (Viewed as "Conditions" Rather Than Probabilities)

Scenario A: High Range (4,000±300 Dollars)

• Conditions: U.S. inflation continues to decelerate, the dollar remains neutral. Geopolitical risks smolder but do not escalate. Central bank net purchases and ETF inflows persist.

• Impact on Japan: The yen fluctuates in a wide range of 140-150,yen-based prices remain high in the 20,000 yen range. Domestic real demand becomes accustomed to high prices and diversifies (shortages of savings, bullion, and ingots continue locally).

• Investment Stance: Accumulation and buying on dips, short-term range strategies for both contrarian and trend-following.

Scenario B: Rebound (Reattempting Past Highs)

• Conditions: Expectations of early U.S. interest rate cuts, geopolitical shocks, and further dollar depreciation.

• Impact on Japan: If the yen depreciates,yen-based prices may reach new all-time highs. Overheated demand→supply constraints (such as shortages of small bars) reoccur.

• Investment Stance: Consider lightening holdings (profit-taking and repurchasing) and hedging.

Scenario C: Further Downward Adjustment (3,700-3,900 Dollars)

• Conditions: Persistent U.S. inflation→high interest rates, dollar appreciation, slowdown in investment demand.

• Impact on Japan:If the yen appreciates, the decline in yen-based prices is amplified. Conversely, if the yen depreciates, the decline in yen-based prices is mitigated.

• Investment Stance: If concerned about dollar-based risks, diversify currencies, and ensure time diversification (accumulation) for additional purchases.

4. Checklist by Investor Type (Practical)

4-1. Beginners and Accumulators

• Use fixed-rate/fixed-amount accumulationfor "time diversification." Avoid being swayed by volatility before and after events.

• Tax and Cost: Compare overall costs including sales fees, spreads, storage fees, and currency costs (physical, bullion, gold accumulation, ETFs).

• ETF Comparison (Example): Understand GLD/IAU overseas and domestically listed ETFs (with or without currency hedging) in Japan. Note: Product selection is at your own risk. Check the premium/discount of the benchmark price.

4-2. Trend Followers and Short-Term Investors

• Event Calendar (U.S. CPI, employment, FOMC, geopolitical news) and control position size based on expected volatility.

• "Profit-Taking is Justified": During overheating, use trailing stops and partial profit-taking to overcome emotions.

• Technical Analysis: Anticipate "V→rebound selling→restructuring" after setting a new all-time high→sharp decline→autonomous rebound.

4-3. Long-Term Diversification and Asset Protection Investors

• Same Perspective as Central Banks (currency diversification, counter-cyclical). Many investors allocate 5-10% of their total household asset allocation to gold (general opinion).

• Practical Solutions for Storage: Consider storage, insurance, inheritance procedures, and the hassle of cashing in physical gold.

5. Reading "Is Gold Over?" Through Data

1. The Strength Indicated by the Number of "Record Highs"
   In 2025, there was an acceleration phase with the 45th record high of the year, and the recent decline has a strong "cooling of overheating" aspect. World Gold Council
   
   

2. Supply and Demand Fundamentals
   Global demand in 2024 is at a record high level, and in 2025, uncertainty, central bank purchases, and ETF inflows keep the foundation intact. Reuters
   
   

3. In Japan, the Yen Factor May Lead to a "Hard to Decline" Phase
   Even if dollar-based prices fall, yen depreciation offsets it, leading to high over-the-counter prices. As of 10/24, it exceeded 22,000 yen/g. Tanaka Gold