Gold Price Plummets! Some Who Rushed to "Buy the Dip" Are Now Completely Blindsided

Originally from: Ningbo Evening News

International gold prices have fallen for several consecutive days.

On Friday, the prices of precious metals worldwide generally declined, with gold dropping below the $4,500 mark. Spot gold fell 3.42%, to $4,491.67 per ounce; COMEX gold futures declined 2.47%, to $4,492.00 per ounce.

As a safe-haven asset, gold has shown “unusually” weak performance since the recent Middle East geopolitical conflicts, leaving netizens confused: they can’t understand it.

Hangzhou man keeps “bottom-fishing” repeatedly,

Buying 160 grams of gold, he was stunned: already lost over 10,000 yuan

“Whenever I don’t buy, everyone around says buying gold is profitable. Why does the price drop as soon as I get in? Did I really crash the market with my purchase?” On the evening of March 18, Mr. Zheng, a post-90s investor from Hangzhou, was browsing the Middle East situation and watching gold prices, unable to stop asking questions in an investment group chat.

“Every time I buy, it drops, and the gold price keeps falling. If this continues, when will I break even?” Mr. Zheng started to doubt the concept of gold as the “king of safe havens.”

According to Chaos News, at the end of February, after Israel and the U.S. launched military strikes on Iran, Mr. Zheng was tempted to buy gold. “They say gold is a safe haven, and with such tense tensions, it should go up at some point.” Mr. Zheng works at a tech company in Binjiang, Hangzhou. Although he has never bought gold before, he has always wanted to find an opportunity to get in.

Photo provided by interviewee

On March 2, he bought 100 grams of gold bars from a jewelry company owned by a friend, at a price of 1,188 yuan per gram. “At the time, I thought this number was quite lucky, and I’d make a profit.” Mr. Zheng said with a bitter smile.

After buying, the gold price indeed rose for a while, even breaking through 1,200 yuan per gram the next day. But the good times didn’t last. Starting March 4, the gold price turned downward, entering a weak consolidation phase, and never returned to his purchase level.

On March 18, when he saw gold prices drop below $5,000 per ounce again, Mr. Zheng couldn’t resist “bottom-fishing.” He bought three small gold bars of 20 grams each at 1,120 yuan per gram, totaling 160 grams of gold.

But what disappointed him was that the gold price fell again after his purchase. Starting around 8 p.m. on the 18th, London spot gold prices plummeted. “I didn’t sleep well all night. When I checked in the morning, the purchase price of the gold bars was about 1,080 yuan per gram. Roughly calculating, the 160 grams of gold I bought already had an unrealized loss of over 13,000 yuan.” Mr. Zheng sighed, “I can only hold on.”

Rate hike logic suppresses safe-haven logic

According to Shanghai Securities News, Qu Rui, Senior Deputy Director of the Research and Development Department at Orient Securities, said, “The ‘counterintuitive’ movement of gold prices mainly stems from the significant suppression of safe-haven logic by interest rate considerations.”

A key background is that during a “super central bank week” when multiple central banks announced interest rate decisions, the escalation of Middle East tensions pushed oil prices higher. From the Federal Reserve to the Bank of England, policy tone seems to be shifting towards a “hawkish” stance, and market expectations for monetary policy have quickly turned “hawkish.”

Federal Reserve Chair Jerome Powell stated after the March policy meeting that rising energy prices have directly pushed up inflation and may have chain effects on the economy by suppressing consumption, squeezing corporate profits, and disrupting supply chains. Until inflation shows clear signs of improvement, rate cuts are not on the table. Although rate hikes are not the mainstream expectation, they remain within policy discussions.

Additionally, the Bank of England also signaled a “hawkish” stance: “If larger or more persistent shocks occur, tighter policy measures will be necessary.”

Qu Rui explained that market expectations for rate cuts have cooled significantly, driving U.S. Treasury yields and the dollar index higher. Coupled with recent liquidity tightening caused by U.S. private credit crises, the dollar benefits from both safe-haven status and yield advantages, diverting safe-haven funds. Meanwhile, as a non-interest-bearing asset, holding gold becomes less attractive as U.S. Treasury yields rise.

Liu Shiyao, researcher at Zijin Tianfeng Futures Precious Metals, told reporters: “On one hand, the surge in oil prices reignites inflation expectations, and the Fed’s expectation of rate cuts within the year has greatly diminished, providing solid support for the dollar through interest rate differentials. On the other hand, rising oil prices mean the world needs more dollars for energy settlements, leading to passive expansion of dollar demand under the ‘petrodollar’ system. Usually, the dollar index and gold are negatively correlated. When the dollar surges, gold is under pressure under traditional safe-haven logic, showing that dollar appreciation has surpassed geopolitical premiums in supporting gold prices.”

According to The Beijing News, Yao Yuan, senior investment strategist at Orient Securities Asset Management’s Asia Investment Research Institute, believes that short-term liquidity squeezes in gold exist, but the long-term allocation logic remains unchanged. Investors must distinguish between short-term volatility and medium- to long-term prospects.

Yao Yuan said that in the short term, geopolitical conflicts and the resulting energy price shocks are the main drivers of global “safe-haven” trading. In this environment, investors tend to cash out of their portfolios. However, over the longer term, gold’s historical performance in resisting geopolitical, macroeconomic, and policy risks remains evident, and gold still has a place in portfolios.