Gold pulls back from highs: Is this the dip investors shouldn't miss?

Gold prices saw a decline on Wednesday, April 23, following their record highs from the previous day. The drop was attributed to a shift in market sentiment after US President Donald Trump adopted a softer approach towards the Federal Reserve and expressed renewed optimism for a trade deal with China. The price of US gold futures fell by 1.5% to $3,366.80 per ounce.

In India, gold prices also dipped, with the cost of 24K gold now at Rs 10,136 per gram. Prior to this, gold prices had hit a peak of $3,500 per ounce, marking the 28th record high of the year. The surge in prices had been driven by inflation concerns, increased central bank acquisitions, and global geopolitical tensions. 

JP Morgan has forecasted that gold prices will exceed the $4,000 per ounce mark by the second quarter of 2026. This prediction is largely driven by looming recession risks, heightened US tariffs, and persistent tensions from the US-China trade war. The bank also projects an average gold price of $3,675 per ounce by the fourth quarter of 2025, with the possibility of surpassing $4,000 earlier if demand exceeds expectations.

According to JP Morgan, "Underpinning our forecast for gold prices heading towards $4,000/oz next year is continued strong investor and central bank gold demand averaging around 710 tonnes a quarter on net this year." However, the bank cautions that a decrease in central bank demand or a resilient US economy could alternatively lead to a proactive Federal Reserve combating inflation risks.

Goldman Sachs has revised its year-end forecast for gold prices in 2025, raising it from $3,300 to $3,700 per ounce. The financial institution also acknowledged scenarios where the prices could approach $4,500 per ounce by the end of 2025. Despite these optimistic forecasts, analysts advise investors to be wary of potential short-term corrections in the gold market. 

As noted by Manav Modi, Senior Analyst at Motilal Oswal, "Gold saw a huge rally. Some profit-taking is natural now. This suggests that recent rallies might lead to inevitable market adjustments." 

Should you go ahead with your investment?

"Investment in gold has been a time-tested practice amongst Indians since it helps preserve their wealth (it is an effective inflation hedge and an efficient portfolio diversifier) and over a period of time it also helps create wealth. Currently, the prices have risen sharply in a short period and are also very volatile because of geopolitical reasons. Despite this volatility, most investors know that it is very difficult to judge the exact timing of investment, i.e., to either catch the wanted dip or peak. A good strategy is to invest in small amounts regularly over a period, which helps price averaging and reduces the stress of catching the right timing. Also, long-term saving in Gold has historically given good results, making it a dependable option for wealth creation and financial security," said Keyur Shah, CEO, Muthoot Exim.

Prathamesh Mallya, Deputy VP-Research, Non-Agri Commodities and Currencies, Angel One, said: "Gold is at such a high price now that it is in unchartered territory. So there is a big possibility of a price correction of at least 10% from the current levels. When that will happen, that’s hard to say. Gold prices in the past few sessions have seen a gap-up. Many investors lost the opportunity to buy between Rs 85,000–Rs 1 lakh. Prices went up by nearly 30% between January and April, and might gain another Rs 5,000 from here, but a correction is due. If you have a time horizon of five years, then stagger your buying."

Siddharth Srivastava, Head – ETF Product & Fund Manager, Mirae Asset Investment Managers (India), said: "Tailwinds supporting gold prices continue to exist—geopolitical issues, concerns around U.S. tariffs, increasing chances of a U.S. recession, higher inflation and weakness in the US Dollar. We're also seeing central banks around the world continuing to buy gold. All of this is still providing support to gold prices, though we are seeing cooling down of demand in jewellery market. The Gold has already shown a strong one-way rally with 1 year return around 30% with several of the aforementioned factors being priced in. While underlying supporting factors for gold continues, some consolidation or price correction may happen. Anyone looking to invest now should do so from a long-term asset allocation perspective and not just for short-term gains. In current scenario, invest in staggered manner with an eye on potential opportunity due to market volatility/dip.”

He advised that gold and silver ETFs have experienced strong investor demand, with commodity ETFs attracting approximately 24,000 Cr in the past year and nearly 13,500 Cr in the last 6 months, bringing the total AUM to over 74,000 Cr as of March 31, 2025. Both folio count and exchange trading have also witnessed an uptick, driven by the impressive performance of precious metals and the growing acceptance of commodity ETFs as a cost-effective, secure, high-purity, and highly liquid vehicle for investing in these valuable assets.

The decline in gold prices coincides with the International Monetary Fund's (IMF) latest economic outlook, which may support gold prices in the future. The IMF has revised its global growth forecast for 2025 down to 2.8% and increased its inflation projection to 3%. This revised forecast reflects concerns over economic stability, which often prompts investors to turn to gold as a safe-haven asset. Consequently, these factors could continue to bolster gold demand, especially if inflationary pressures persist. 

In the broader market context, the fluctuations in gold prices are part of larger trends influenced by macroeconomic factors, including central bank policies and geopolitical developments. As investors navigate these uncertain times, the demand for gold as a hedge against volatility remains strong. However, short-term price fluctuations are expected as the market adjusts to new information and investor strategies evolve. Both JP Morgan and Goldman Sachs' forecasts serve as indicators of potential long-term trends, but analysts urge caution considering the dynamic and unpredictable nature of global markets.