Experts say buy the dip as gold poised for another move higher

The bullish case for gold remains strong, and the recent decline in gold prices presents an opportunity for investors to buy, according to experts. 

In the previous trading session, the price of gold experienced a significant decline, falling below the $3,000 per ounce mark. 

This drop represented a new low for the precious metal since March 13 and was primarily attributed to investors liquidating their gold holdings to offset losses incurred in other financial markets. 

“Gold is traditionally a safe haven, but sometimes investors sell it along with other asset classes to cover losses elsewhere,” analysts at ING Group, said in a note. 

At the time of writing, the most-active gold contract on COMEX was back above $3,000 per ounce.

The contract was up 1.7% at $3,026.11 per ounce. 

Meanwhile, silver prices on COMEX were up 2% at $30.20 per ounce. 

Growing trade tensions spark safe-haven demand

Even as gold had fallen from its recent peaks, prices have started to consolidate again on Tuesday. 

US President Donald Trump's threat to impose a 50% tariff on Chinese goods if Beijing did not withdraw its recent 34% tariff increase on American imports reignited safe-haven demand for gold.

China's Ministry of Commerce promised to retaliate if Washington imposed the new tariffs, escalating anxieties of further economic turbulence and sparking a global risk-aversion sentiment in the markets.

“We believe central banks will continue to buy gold as geopolitical tensions and economic uncertainty push them to increase allocations toward safe-haven assets,” ING analysts said. 

“This should provide a further tailwind to gold prices looking ahead,” they added. 

Growing expectations of Fed rate cuts

The US Federal Reserve's (Fed) potential resumption of its interest rate-cutting cycle as early as May, with a projected total of five rate cuts in 2025, has fueled risk appetite, put downward pressure on the dollar, and decreased US Treasury bond yields.

Goldman Sachs has revised its forecast for Fed rate cuts in 2025, increasing the projection from 105 basis points to a total of 130 basis points.

Dhwani Mehta, analyst at FXstreet, said in a report:

Trump urged the Fed to implement interest rate cuts promptly, contending that the US economy was robust.

Fed Governor Adriana Kugler emphasised the Fed's commitment to the 2% inflation target on Monday. 

She noted that while short-term inflation expectations have increased, they remain well-anchored in the longer term.

Kugler stressed that the central bank's focus should be on maintaining price stability.

Opportunity to buy

According to Goldman Sachs, the recent sell-off in gold prices could be a buying opportunity for investors. 

Goldman Sachs believes that the recent decline in gold prices is due to short-term technical factors, such as position liquidations caused by the equity market sell-off and some rotation into alternative assets. 

Despite this, the bank maintains that gold will be well-supported over the medium term, according to a Kitco report.

“In an overall risk-off panic such as this, investors are forced to sell everything they can to raise funds, particularly if the purchases were made using leverage,” said David Morrison, senior market analyst at Trade Nation. 

“That gold has been a victim of this move has much to do with its recent surge to record highs. This move encouraged fresh buying, much of it employing leverage,” Morrison added. 

Goldman analysts maintain their year-end gold forecast at $3,300 per ounce, with a forecast range of $3,250-3,520. 

They note that risks to their forecast are skewed to the upside, and continue to see mostly upside risks to investors' positioning.

In the short-term, Trade Nation’s Morrison believes that gold prices could rise further with consolidation near the $3,020 per ounce.