Gold price falls below $4500 mark, weekly decline exceeds 10%, investors' "bottom-fishing" sentiment cools

Why Did the Safe-Haven Effect of Gold Fail?

Just this past week, international gold prices experienced a sharp plunge.

As of March 21 Beijing time, the spot price of London gold not only broke below the key level of $4,500 per ounce, but also fell by 10.49% for the week, marking the largest weekly decline since March 1983.

The conflict in the Middle East is still escalating. Why did gold’s safe-haven effect fail? Wang Jun, Chief Expert at Greenwave Futures, told First Financial that in the short term, macro factors such as “rising global inflation—high interest rates—strengthening US dollar” have overshadowed the traditional safe-haven logic of gold. Coupled with the resonance of capital behavior and technical adjustments, this has led to gold falling instead of rising.

Market traders also told First Financial that during the rapid price decline, trading volume significantly increased, indicating fierce battles between bulls and bears. Some funds that previously entered the market based on safe-haven logic showed signs of stop-loss exits.

Gold Prices Drop Over 10% in a Week, Global Sell-Off Begins

According to Wind data, after reaching a high of around $5,040 per ounce on March 14, London spot gold prices turned downward, closing lower for eight consecutive trading days. The main COMEX gold futures contract closed at $4,592.1 per ounce, a weekly drop of 9.62%.

Silver prices fell even more sharply, dropping over 15% during the same period. Palladium and platinum also declined in tandem with international gold prices.

In addition to precious metals, global assets have also been sold off. The three major US stock indices have fallen for four consecutive weeks, with the S&P experiencing its longest weekly losing streak since March 2025. European bond markets also declined across the board, with the UK 10-year government bond yield rising 17.7 basis points this week, reaching 5% for the first time since 2008. Germany’s 10-year government bond yield hit a new high since 2011, and the two-year German bond yield surged 23 basis points this week.

On the news front, Xinhua reported that the US is formulating strategic plans to seize Iran’s “nuclear reserves.” Additionally, Iran’s military threatened to launch destructive strikes against “evil” US and Israeli officials, commanders, and soldiers, stating they would no longer be safe even while on vacation abroad.

Jerry Chen, Senior Analyst at CGS-CIMB Group, believes that since the outbreak of Middle East geopolitical conflicts, the logic of financial markets has become clearer: safe-haven funds are flowing into crude oil and the US dollar. Inflation risks are forcing central banks worldwide to end easing policies or even shift to rate hikes, putting pressure on gold and causing global stock markets to sell off.

Furthermore, macroeconomic data released this week further dampened market expectations of rate cuts. The US Producer Price Index (PPI) for February rose 3.4% year-on-year (vs. expected 3.0%), the largest increase since July 2025; core Personal Consumption Expenditures (PCE) inflation expectations were raised to 2.7%.

Meanwhile, the Federal Reserve signaled a hawkish stance, maintaining the federal funds rate target range at 3.50%–3.75%, marking its second pause in rate cuts this year. The Fed also raised its forecasts for PCE inflation, core PCE inflation, and GDP growth for the coming years.

Additionally, both interest rates and the US dollar strengthened simultaneously, directly suppressing gold prices. The latest 10-year US Treasury yield rose above 4.25%, and the US dollar index remained above 100, further lowering dollar-denominated gold prices.

Market Panic: “Bottom-Fishing Army” Caught Off Guard, Sentiment at a Cold Point

The rapid decline in gold prices has also caused many ordinary investors to suffer unrealized losses due to misjudging the trend. Xiao Wen, an investor from Shanghai, is one example.

On the morning of March 19, Xiao Wen saw that overnight international gold prices had fallen to around $4,800, and the quoted price of her stored gold also dropped. She decided to buy. Around 9 a.m., she purchased 12 grams of bank-stored gold at 1,082.6 yuan per gram, plus 6 yuan in fees, with a holding cost of about 1,089 yuan per gram. “Recently, the stored gold price has stayed above 1,100 yuan. It had fallen so much, I thought it would rebound,” she said.

In the afternoon around 2 p.m., international gold prices suddenly plunged. The quote on her screen fluctuated rapidly downward. “I watched my phone all afternoon, feeling desperate as the price kept falling.” By around 5 p.m., her account showed a loss of about 500 yuan, and the decline was still ongoing.

In the early hours of March 21, Xiao Wen continued to monitor US stock trading. She placed a buy order at 1,010 yuan but the price didn’t reach it. Just before she was about to sleep, worried she might miss a chance to buy more, she hesitated briefly and bought again at 1,026 yuan. The next morning, she found that the gold price had fallen to as low as 1,007 yuan.

Similarly, Xiao Lin from Hangzhou was caught in this decline. When gold prices started dropping sharply on March 18, he increased his holdings of gold ETFs. Over the next two trading days, the net value of his gold ETF continued to decline along with the gold price, and he added two more positions to try to average down.

“Every time it drops, I think it’s the bottom, but it turns out I’m always caught halfway up the mountain,” Xiao Lin said. Currently, his three positions are showing over 10% unrealized losses, and his funds are nearly exhausted. He can only “lie flat.” According to Wind, as of March 21, seven gold ETFs linked to the SGE Gold 9999 index shrank by over 24 billion yuan this week.

Investors like Xiao Wen and Xiao Lin, who keep buying as prices fall, are not few. Industry experts warn that this “bottom-fishing” mentality can cause people to overlook the ongoing trend. Blindly entering the market during sharp declines often involves significant risks.

Can Prices Recover?

The current market concern is whether gold prices can rebound.

Huaxia Fund analysts believe that gold, regarded as a safe-haven asset, has continued to decline since March because its safe-haven nature is reflected in the collapse of US dollar credit and runaway inflation, rather than liquidity shortages or deflation risks. The market is worried about marginal liquidity deterioration, but the shocks from geopolitical conflicts have significantly weakened.

They believe that the tightening of monetary policy impacting gold is mostly temporary. The long-term logic of geopolitical conflicts and central bank gold purchases remains intact, and the upward momentum of gold in the medium to long term continues. However, short-term risks need to be released first.

Despite market panic, the institution still states that short-term pain cannot obscure the long-term value of gold.

UBS Wealth Management believes that geopolitical uncertainties, ongoing central bank purchases, and safe-haven demand will continue to support gold prices. Recent price adjustments are consistent with early stages of previous geopolitical crises. As risks persist and real interest rates decline, gold could reach new highs this year.

Ruo Ziheng, Chief Economist at Yuekai Securities, points out that the recent sharp drop in gold is not a sign of a bull market ending but a deep correction during an upward trend. In the long run, normalized geopolitical risks, strong gold demand from non-US central banks, and the potential shift from “inflation” to “stagnation” in the global economy will provide solid support for gold prices.

However, for investors eager to “bottom-fish,” most institutions advise caution. “Technical analysis indicates that gold has clearly broken below the 60-day moving average, a key support level, which could further open the downside,” said the trader. Given that the Federal Reserve’s monetary policy and the US dollar’s trend are still evolving negatively, the short-term downward trend has not ended. Ordinary investors should avoid blindly jumping into the fall. It’s better to wait until gold stabilizes in the $4,400–$4,600 per ounce range before gradually building a medium- to long-term position.