Spot gold rebounds to $4,500, with year-to-date gains once dropping to zero

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Journalist | Tang Jing, Intern Reporter Lin Qianwei

Editor | Zhou Yanyan, Liu Xueying, Zeng Fang

At 10:25 p.m. on March 23, both spot gold and silver prices turned positive. Spot gold rose 0.07%, to $4,500.29 per ounce; spot silver increased by 3.52%, to $70.26 per ounce.

Today during the day, spot gold repeatedly fell below $4,500, $4,400, $4,300, $4,200, and $4,100 per ounce, dropping below $4,100 for the first time since November 24 last year. Intraday, it plunged as much as 8.7%, erasing all gains of the year.

On the same day, domestic gold prices generally declined. According to Tencent Licaitong, domestic spot gold Au9999 was priced at 923.9 yuan/gram; multiple brands of gold jewelry also decreased in price. Chow Sang Sang 24K gold jewelry was 1,367 yuan/gram, down 5.27% intraday; Lao Miao Gold was 1,374 yuan/gram, down 4.91%; Chow Tai Fook was 1,375 yuan/gram, down 4.98%.

In the morning, the Shanghai Gold Exchange issued a notice: recent market instability is influenced by multiple factors, causing significant volatility in precious metal prices. Market participants should closely monitor market changes, prepare detailed risk emergency plans, and maintain market stability. Investors are advised to manage risks prudently, control positions reasonably, and invest rationally.

Why has gold’s “safe-haven attribute” failed?

Despite ongoing tensions between the US and Iran since March, gold has not shown the usual “glow” of a safe-haven asset. Instead, it has been constrained by a strong dollar, consolidating weakly for nearly three weeks. Recently, gold has started to decline, with international gold prices breaking through eight hundred-dollar levels over four days.

“Currently, the decline in gold prices has formed a medium-term correction,” said Tang Linmin, senior researcher at China International Futures. He explained that escalation of US-Iran tensions could lead to higher inflation expectations and a more hawkish Federal Reserve, prompting market sell-offs of gold. If the situation in Iran does not ease or worsens further, the correction may not be over. Conversely, if there is a major turnaround in Iran, gold could quickly stabilize and rebound.

Xia Yingying, head of the Precious Metals and New Energy Research Group at Nanhua Futures, pointed out that during this Middle East escalation, gold did not rise as usual due to safe-haven sentiment. Instead, it diverged from conflict trends, indicating a conflict between market safe-haven logic and macro pricing logic. There are three main reasons:

First, energy shocks have altered market expectations for policy direction. Rising real interest rates suppress gold prices. Risks in the Strait of Hormuz pushed up oil prices, affecting inflation decline speed and cooling expectations for Fed rate cuts this year, even raising fears of rate hikes. Higher US Treasury yields and a rebound in the dollar, along with rising real interest rates, have suppressed gold valuation, offsetting safe-haven demand.

Second, the dollar’s safe-haven status is more prominent now. The dollar, as a safe asset with liquidity advantages, benefited from a previously low dollar index, reflecting valuation advantages. As monetary policy expectations turn hawkish, the dollar rebounds, attracting safe-haven funds that might otherwise flow into gold, creating a “rising dollar, falling gold” scenario.

Third, liquidity management and fiscal spending needs in some countries have also triggered gold sales. For example, Russia’s central bank sold gold to cover fiscal deficits; Poland’s central bank sold gold temporarily for defense financing. Additionally, rising oil prices have increased trade deficits and exchange rate pressures in emerging markets, leading to financial market volatility and liquidity stress, prompting gold liquidation to ease pressure—conflicting with safe-haven demand.

Xia Yingying summarized that the US-Iran escalation, through the “inflation—interest rates—liquidity” transmission chain, reactivated traditional macro factors that suppress gold, temporarily disconnecting gold’s pricing from safe-haven logic.

Long-term support for gold’s rise remains

Wang Yanqing, chief analyst at CITIC Construction Investment Futures, explained that the main factor driving gold prices down now is liquidity tightening. The US-Iran escalation has triggered a global asset sell-off, with stocks and bonds both falling sharply. In such an environment, gold is also vulnerable, similar to the 2008 financial crisis and the COVID-19 pandemic in 2020, when liquidity tightening caused gold to decline.

Wang admitted that the Fed’s rate cut expectations have weakened due to inflation concerns, reducing short-term support for gold. However, in the long run, factors like central bank gold purchases and weakening US dollar credit still exist, providing future support. Currently, liquidity risk is the main market volatility driver. If the global asset sell-off subsides, gold could stabilize. Short-term, investors should adopt a wait-and-see approach. Considering gold’s medium- and long-term upward momentum, it’s advisable to wait for market stabilization before allocating.

According to the “Economic Information Daily,” the Fed’s March monetary policy statement noted that the impact of Middle East tensions on the US economy remains uncertain, with significant downside risks. Fed Chair Powell said that due to unclear scope and duration of Middle East impacts and the effect of rising oil prices on consumption, the Fed is cautious.

Several interviewees told reporters that the US-Iran situation is a temporary shock to gold prices. Once tensions ease, Fed monetary policy expectations may shift dovishly, boosting gold.

Xia Yingying added that with the US midterm elections approaching, the likelihood of prolonged US-Iran conflict is low. This limits the risk of deep, widespread inflation. Moreover, if Kevin Waugh succeeds Powell as Fed Chair, rate policy may tilt toward easing. Additionally, the US labor market shows signs of weakening, and liquidity risks in stocks and bonds are rising. The probability of the Fed resuming rate hikes this year remains low. Overall, gold’s long-term upward trend remains intact, with medium-term movements depending on Fed policy.

Yuan Zheng, analyst at Galaxy Futures, told reporters that although recent gold prices have sharply corrected, the long-term upward logic remains unbroken. The recent plunge is mainly due to short-term trading shifts. Future Fed policy expectations will influence gold prices, especially if Kevin Waugh reduces the pace of balance sheet runoff (RMP). This impact is limited, and the medium- to long-term support from de-dollarization and central bank gold purchases persists. Gold prices are expected to regain upward momentum.