Gold has retreated by 26% this year! The reasons behind the six historical plunges in gold prices have been identified.

Ask AI · How Do Federal Reserve Policies Affect Gold’s Historical Volatility?

Against the backdrop of the U.S.-Iran conflict, a rare development is unfolding in the market: international oil prices have surged 60%, while international gold is staging a roller coaster. After plunging 26% from its year-to-date historical peak of $5,598 to $4,099, gold fell nine straight days and then delivered three consecutive gains. As of March 31, gold has violently rebounded to $4,600. The U.S. Dollar Index also has strongly broken through the 100 level. With all three breaking the traditional negative-correlation “spell,” they are rising in sync.

The core of this rare setup is “interest rates, liquidity, and expectations,” driven by three forces. Geopolitical conflict has led to disruptions in shipping through the Strait of Hormuz, pushing up oil prices. Amid inflation concerns, the market expects the Fed to keep rates high, strengthening the dollar. Gold, meanwhile, relies on its geopolitical safe-haven and inflation-hedging attributes to offset dollar pressure and achieve a rebound.

Behind this rapid stop in gold’s rally, has the pullback ended? What is driving the plunge in gold prices? Looking back from the 1980s to today, gold has gone through six epic rounds of sell-offs, each tied to factors such as Fed policy and liquidity.

Based on the views of multiple brokerages, the current panic selling in gold has ended. Bargain-hunting capital is moving in, and increased global central bank holdings provide support. However, a pattern in which all three rise simultaneously may be hard to sustain long term; the subsequent direction will depend on Fed policy and the geopolitical situation. In addition, the underlying logic that supports gold’s long-term bull market has not been fundamentally shaken. Global central bank demand for gold remains strong. According to data from the World Gold Council, central banks in emerging markets such as Guatemala, Indonesia, and Malaysia have recently begun buying gold. These central banks either will return to the market after a long pause, or are building gold reserves for the first time.

In the comments, tell me: Do you think this gold rebound can last?