Is the strong rebound in gold prices a confirmed reversal or just a technical correction?

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Source: International Financial News

On March 25th, after experiencing a sharp correction, the gold market saw a significant rebound, with spot gold temporarily surpassing the key level of $4,600 per ounce during trading. Domestic and international futures and spot markets moved higher in sync, with market volatility clearly increasing.

As of the time of reporting, London Gold is quoted at $4,554.08 per ounce, up 1.83% for the day, with a high of $4,602.631 and a low of $4,455.258 during trading, highlighting a clear tug-of-war between bulls and bears.

Futures markets also rose in tandem. As of the report, COMEX gold futures surged 3.12% intraday, at $4,539.5 per ounce, with a high of $4,601 and a low of $4,458.2, maintaining a close link with the spot market trend.

The domestic gold market’s rebound was equally strong. By the close in the afternoon, Shanghai Gold Exchange’s Gold T+D jumped 4.28% to 1,014.44 yuan per gram; Shanghai Futures Exchange’s main gold futures contract rose 3.55% to 1,013.96 yuan per gram. The Gold T+D hit a high of 1,024 yuan per gram during trading, and the main gold futures contract reached a high of 1,027.88 yuan per gram, both firmly above the 1,000 yuan per gram threshold.

In the face of intense volatility in the precious metals market, several banks including Industrial and Commercial Bank of China, Bank of China, China Construction Bank, and China Minsheng Bank have recently issued risk warning notices for the precious metals market. The notices all point out that domestic and international precious metal prices have experienced increased fluctuations recently, advising clients to enhance risk awareness, invest rationally based on their financial situation and risk tolerance, and control their positions reasonably.

Non-trend reversal

“This rise in gold prices is not accidental but the result of multiple factors resonating,” said Wang Weimang, an investment manager at Zhonghui Futures Asset Management Department.

Wang Weimang further analyzed that, on one hand, geopolitical risks have reignited, with complex changes in Middle Eastern situations, alternating signals and military actions between the US and Iran, causing risk aversion sentiment to quickly return after a brief retreat. On the other hand, international gold prices previously experienced a record deep correction, rapidly falling from a high point to around $4,100 per ounce, showing obvious oversold conditions technically, which accumulated strong rebound momentum. Under the combined effects of short-term profit-taking by bears and tentative counterattacks by bulls, prices were able to recover quickly.

Liu Dongmei from CITIC Futures Investment Consulting Department said that geopolitically, the US delayed strikes on Iran’s energy infrastructure and proposed a conflict-ending plan containing “15 conditions” through Pakistan, indicating easing tensions. Energy prices fell back, alleviating concerns about persistent inflation, which boosted precious metals. Additionally, the US dollar index retreated from high levels, providing further support for precious metal prices.

After consecutive declines, a single-day surge—does this mean gold has re-entered an upward channel?

“This round of increase is more about emotional correction and technical rebound during a downward trend rather than a trend reversal,” Wang Weimang believes. The core factors that truly influence the medium- and long-term direction of gold prices, such as the Federal Reserve’s interest rate path and changes in real US yields, have not fundamentally changed. Therefore, without new macro catalysts, a single-day surge is not enough to confirm a return to a sustained upward trend.

Liu Dongmei also shares a similar view. She believes that the market remains highly speculative, with frequent news changes and intense volatility. Gold prices have already recovered to early-year levels, but until prices break previous highs and institutional funds significantly flow back, it cannot be confirmed that the market has fully re-entered an upward channel.

“Monkey Market” characteristics are evident

“The current gold market exhibits typical ‘Monkey Market’ features, characterized by price jumps, fierce battles between bulls and bears, and a lack of clear direction,” Wang Weimang pointed out. Factors influencing gold prices in the short term switch frequently, with risk appetite and risk aversion alternating, leading to a lack of clear, unilateral movement logic.

Wang Weimang further predicts that before clear interest rate cut timings or new macro guidance appear, gold prices are likely to fluctuate within a broad range of $4,300 to $4,750, with high volatility.

In the long term, Wang Weimang believes that the long-term support logic for gold remains solid. The global “de-dollarization” trend continues at the central bank level, with many countries strategically increasing their gold reserves, providing a bottom support for prices. Meanwhile, geopolitical uncertainties, high global debt levels, and rising inflation central points all highlight gold’s role as a final safe haven and inflation hedge. Despite short-term sharp fluctuations, from an asset allocation perspective, the long-term logic of gold remains intact. Investors should distinguish between short-term trading and long-term holding strategies.

Liu Dongmei also stated that currently, gold prices are highly volatile at high levels, with wide fluctuations and unclear directions, as market sentiment is repeatedly pulled in different directions. In this environment of high volatility, she recommends rational allocation, shifting from “seeking short-term gains” to “long-term allocation and strict leverage control,” avoiding emotional trading. Gold should be used as a ballast and hedge in a portfolio, not for short-term speculation; avoid chasing highs and selling lows, build positions gradually, and strictly control leverage to reduce risks from sharp swings.

Regarding investor strategies, Wang Weimang said that one should abandon short-term impulsiveness, and adopt a strategy of phased buying and dollar-cost averaging. Instead of chasing gains during a single day’s surge, divide funds into multiple parts, and during market corrections or at the lower end of oscillations, gradually build positions to smooth costs and reduce timing risks. Also, choose tools within one’s capacity, preferably non-leveraged or low-leverage instruments, and keep an eye on Middle Eastern developments, US Treasury yields, and Federal Reserve policy signals.

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