The Price of Gold has Dropped After Reaching $3,500. What's Next?

Gold prices have continued to perform well in the spring months, as tariffs, recession fears and a weak bond market have increased the attractiveness of the yellow metal. A sharp increase in investment demand in March and April also helped.

In April, the price of gold rose by a total of 5.3 percent. However, volatility was exceptionally high that month – the price fluctuated by as much as about $550 per ounce. The low was reached on April 7 at $2,956, and the high was reached just two weeks later at $3,500. In May, gold rose by 0.1 percent and ended the month at $3,289 per ounce.

June has started on a positive note. Although there has been a sideways movement since the April highs, gold is currently trading at $3,360 an ounce. This year, gold has risen 28 percent in dollar terms, which is an exceptionally rapid increase, exceeding the price increase of the entire previous year. Silver has risen 19 percent in dollar terms in 2025.

In euros, the price increase for gold has been slightly more modest this year – 16 percent. This is mainly due to the fact that the dollar has depreciated significantly against the euro this year. Silver has gained 8 percent in euros this year.

Tariffs and the Federal Reserve

Trump’s tariff policies have been a major short-term driver of gold prices. Gold began falling from its highs shortly after Trump put tariffs on the world on hold for 90 days.

In addition, the Federal Reserve decided to continue cutting interest rates in March. In May, rates were left unchanged, but the central bank noted that “uncertainty about the economy has increased further” and that tariffs are extremely problematic for them. Namely, tariffs tend to negatively affect economic growth (and thus the unemployment rate) while increasing inflation. Since the central bank’s goal is to keep both unemployment and inflation low, their job becomes much more difficult.

In May, central bank officials first mentioned the word stagflation. They warned that the tariff shock had not yet arrived and that it could create stagflation – an environment where the economy is not growing but inflation is high. The last time we saw such an environment in the US was in the early 1980s.

Persistent stagflation would be very supportive for the price of gold

In addition, there are signs that the US government debt market is crumbling. Namely, after Trump’s tariffs, government bond yields actually started to rise, although one would think that investors would flee to “safe” bonds, pushing down their yields. But the opposite happened, and bonds became cheaper, while gold became more expensive. This is a sign that the monetary rules that have been in place so far are clearly cracking, both globally and in the US.

Investment Demand for Gold has Increased Sharply

At the end of April, the World Gold Council released its first-quarter gold demand figures. Overall demand has remained strong this year, helped by investment demand. The last time investors bought this much gold was at the start of the war in Ukraine.

Investment demand increased by 170 percent in the first quarter compared to a year ago, to 552 tons. This was mainly due to the fact that there was a large inflow of money into gold-backed exchange-traded funds – while 113 tons of gold flowed out of the funds at the same time last year, 227 tons of gold were added in the first three months of this year. The growth in demand for physical coins and bars was driven primarily by Chinese investors.

It is true that investment demand has cooled somewhat in May, and there has been a monthly outflow of gold from ETFs. This is also one of the reasons why the price of gold has retreated from its April peaks.

Central bank gold purchases also remained high, with a total of 244 tonnes of gold purchased in the quarter, 24 percent more than the average for the past five years. Poland remains the largest gold buyer.

What Happens Next?

The volatility of the gold market has clearly increased in recent months, and the price increase became very rapid in April. In my opinion, it is likely that $3,500 was a local peak, which may take a few more months, potentially longer, to overcome. This is because investment demand has cooled somewhat in May. Jewelry demand has also come under pressure in Asia due to high prices. However, this does not significantly affect the long-term picture (the following years). I have repeatedly emphasized this in my analysis, but it is worth remembering that a long-term bull market tends to surprise investors on the upside (i.e. the price rises more and faster than expected). So waiting for big drops may not necessarily be a good idea.

The gold market has had good buying opportunities over the past year and a half, especially when the price has fallen by 4-10 percent. From April 21 to May 15, the price fell by a total of 10.9 percent in dollars, including intraday peaks. Mid-May could be considered a fairly good buying opportunity.

Incrementum AG also published a gold market report at the end of May, which can be considered the most important gold market analysis study of the year. According to the base scenario, the authors set a gold price target of $4,800 per ounce by 2030. According to the optimistic scenario, gold could move to $8,900 by the end of the decade, according to their estimate. Considering fundamental and technical indicators, in my opinion, gold could reach the $6,000-7,000 range by 2030.

It is likely that there will be 15-20% corrections in that time period. However, it is not possible to predict when these will happen. Since gold continues to be in a long-term uptrend, I believe that 5-10% declines will continue to offer good entry points. Gold is becoming the new buy the dip asset.