Who’s Buying The Dip As Gold Tests Support At $3,200?

(May 1, 2025 - Neils Christensen, Kitco News)

(Kitco News) - The gold market has seen some dramatic volatility in the last four weeks, with prices breaking above $3,000 an ounce and creating a blowoff top rally to $3,500. However, some analysts are not ready to give up on the metal just yet, even as investors begin to take profits off the table.

After significant selling pressure overnight, gold prices are poised to end the North American trading session with a 2% loss, hovering above $3,200 an ounce. Spot gold last traded at $3,223.70 an ounce, down 1.9% on the day.

At its overnight lows, gold was down 8.5% from last week’s high, closely matching the nearly 9% correction seen after the Nov. 5 U.S. election results.

Some analysts are warning that gold has room to fall further, but many continue to expect these corrections will be bought, as the roughly two-year rally remains firmly intact. While gold’s correction has been extreme, some analysts note that it should not be a major surprise as speculative investors have been selling gold since late March.

In the last five weeks, gold’s net longs have dropped by 34% to 120,902 contracts, according to the latest trade data from the Commodity Futures Trading Commission.

David Morrison, Senior Market Analyst at Trade Nation, questioned in a note Thursday how strong support is at $3,200 and said he sees the potential for lower prices.

“While the daily MACD has turned lower, gold remains overbought. And the fact that the MACD is pointing south suggests that momentum is currently to the downside. Gold now faces its first downside challenge, and the bulls will be hoping that it can hold $3,200 as support. But while it’s a nice round number, it is unlikely to prove much of a challenge for the bears. They will be trying to drive prices down to $3,150 or even $3,000 to really test the bulls’ resolve,” he said.

Analysts note that gold is experiencing a strong reversal as sentiment around the global economy slowly starts to improve. President Donald Trump has said his administration is making progress on trade negotiations, a result of his historic global tariffs on imports.

However, some analysts—including Morrison—have said that markets will soon need to see proof that talks are progressing.

“It’s worth considering that sentiment can reverse quickly. Just because Trump has gone quiet on tariffs doesn’t mean the U.S. trade war is over,” he said.

Aaron Hill, Chief Analyst at FP Markets, an Australian-based global broker, said he is also watching tariff talks to potentially determine gold’s near-term direction.

“If any meaningful deals emerge, risk assets will likely continue to rally — dulling the luster of gold. As trade tensions ease, capital often rotates out of safe-haven assets like bullion and into equities or commodities tied to industrial growth. However, the risk remains that these remarks are more political posturing than policy movement, meaning any sharp drop in gold could soon find a floor if these promises don’t translate into action,” he said in a note.

While market sentiment is dominated by geopolitical uncertainty, Hill noted that there are other supportive factors for gold. He explained that the slowing economy presents a difficult challenge for the Federal Reserve as it maintains a neutral monetary policy stance in the face of stubborn inflation.

“Donald Trump has repeatedly pushed for lower rates, arguing they are essential to maintaining U.S. economic competitiveness and supporting domestic markets. With inflation still sticky and the labor market only now starting to show signs of softness, the Fed faces a delicate tightrope act. The recent jobless claims uptick and any potential NFP weakness could give the Fed political cover to soften its tone without appearing reactive to Trump’s pressure,” Hill said.

“In the short term, gold could remain under pressure if risk-on sentiment holds and the NFP data is strong. But if trade deals stall or labor market weakness accelerates, gold could find itself back in favor—and quickly,” he added.

Bart Melek, Head of Commodity Strategy at TD Securities, said that while gold prices could continue to move lower, he sees the correction as a buying opportunity.

Melek added that positive tariff talks could push gold prices as low as $3,000 an ounce; however, he also noted that he still expects gold prices to average around $3,500 in the fourth quarter of this year.

“It’s likely too late to make tariff deals that would prevent an economic slowdown and higher inflation, implying the Fed may well cut rates in a de facto stagflationary environment,” he said. “At the same time, many relationships between the U.S. and key trading and strategic partners have been broken, suggesting that a slow pivot away from USD and Treasuries will continue. This implies that investors and central banks should again tilt toward gold, including discretionary traders when carry costs drop along with Fed easing.”