Economist Forecasts Gold Will Fall to $3,500 Before Surge

American economist Martin Armstrong considers the recent drop in gold prices temporary and predicts the upward trend will resume from the first quarter of 2027.

According to Ambassador Arjan, the recent drop in the price of gold has raised the question of whether the upward trend of this precious metal has ended.

Martin Armstrong, the well-known American economist, has a clear answer: no.

He believes that the drop in gold prices is more due to the temporary easing of concerns about geopolitical tensions and is not necessarily a sign of a change in the market outlook.

Based on his computer model, Armstrong predicts that the odds will turn in favor of gold from the first quarter of 2027, i.e. between January and March. According to him, this drop is only an initial bottom, and from the first quarter of next year, the market trend will rise again.

But the main question is: Why is Armstrong confident that gold will grow again? He points to the changing behavior of investors.

Capital flight from government debt to the private sector

Armstrong points to an important shift in investor behavior to explain his prediction. During the Great Depression of 1929, investors were moving their money out of the private sector and into the public sector. But now this trend has completely reversed.

According to him, funds are flowing to America, but their destination is the private sector, not the public sector. Historically, whenever both sides reach extremes, collapse occurs.

This change of direction shows that the confidence of large investors in the ability of governments to repay debt bonds has been undermined.

In practice, the attractiveness of private sector stocks, commodities and real assets is increasing. Armstrong believes that this change in capital flow is one of the important factors that can help the growth of gold prices in the coming months.

European tensions and its impact on the gold market

According to Armstrong, the situation in Europe is more worrying. He believes that European countries have gradually realized the inefficiency of the European Union. At the same time, the increase in military tensions can raise the cost of government borrowing.

Armstrong warns about the direct relationship between war and financial markets. According to him, we cannot expect Europe to beat the war drum and reduce long-term interest rates at the same time. Interest rates always jump during wartime and inflation rises along with it.

As the yield and interest rate of bonds increase, the financial burden of governments becomes heavier. Investors also show less desire to keep these bonds with negative real returns.

Armstrong also points to the upcoming elections in the United States, Israel, and Ukraine, and believes that these developments can increase investors' concerns.

Despite predicting a rise in gold from early 2027, Armstrong does not rule out the possibility of further price declines in the near term.

According to him, if the price of gold closes below the level of $4,000 at the end of the week, it may go down to the range of $3,500 to $3,700.

But the question is, how long will this correction take? Armstrong believes that there is not much time left to continue this reform.

According to him, the issue is not only to what level the price will decrease, but also time is important. There is a limited opportunity for this correction to occur.

There are many geopolitical risks facing the market. When investors realize the extent of these risks, the price of gold will jump.

So in Armstrong's scenario, gold may experience further declines before starting to rise again. However, he expects the market trend to change as geopolitical concerns increase and the price will rise again.