Is it time to buy gold at the bottom?

Following the largest weekly decline in 15 years last week, international gold prices continued to fall on the 23rd: the $4,400, $4,300, $4,200, and $4,100 per ounce levels were repeatedly broken, erasing all gains for the year.

COMEX gold prices once dropped more than 10%, and London spot gold fell over 8.7%.

Meanwhile, there are no signs of an end to the Middle East geopolitical conflict. This time, the concept of “gold in turbulent times” seems to have failed.

“Gold in turbulent times” refers to gold being widely recognized as a safe-haven asset during international instability.

Dong Ximiao, Chief Economist at Zhaolian and Deputy Director of the Shanghai Financial and Development Laboratory, told Sanlihe that the main reason for the sharp decline in international gold prices is a fundamental shift in market logic: short-term macro-financial shocks have completely overshadowed the safe-haven demand driven by geopolitical conflicts.

On March 18, U.S. time, the Federal Reserve announced that the federal funds rate target range would remain unchanged at 3.5% to 3.75%. Many international financial institutions adjusted their expectations, delaying the first rate cut of the year from June to September or October, and now expect only one rate cut this year.

Behind this is the escalation of the Middle East situation pushing up oil prices, intensifying market concerns about inflation, and forcing the Fed to adopt a cautious stance on future monetary policy, directly pressuring non-yielding gold. Under these expectations, the dollar index rose above 100, and funds flowed from gold to high-yield assets like oil, directly suppressing gold’s attractiveness.

Nankai University Finance Professor Tian Lihui pointed out that the current gold market is dominated by derivatives such as ETFs, futures options, and swaps. Algorithmic trading and programmed stop-loss mechanisms have further amplified price volatility, causing short-term gold prices to deviate from fundamentals far more than before. This plunge is not only a correction of the overly crowded “rate cut trade” but also a rational return of the market to a real interest rate environment.

In Dong Ximiao’s view, the Fed’s “hawkish” stance and the strong dollar are unlikely to reverse in the short term, so gold prices still face downside risks in the near term, but the scope of decline may be relatively limited, and the medium- to long-term upward logic remains.

“Global geopolitical risks are becoming normalized, central banks continue to buy gold, and the weakening of the dollar credit system will provide some support for gold prices. If the Middle East situation eases, oil prices stabilize, or economic data forces the Fed to resume rate cuts, gold prices are expected to rebound,” Dong Ximiao said.

As of the time of writing, international gold prices showed signs of recovery, with both COMEX gold and London spot gold prices significantly narrowing their declines and rising above $4,400.

Does this mean investors can start bottom-fishing? The answer is: caution is necessary.

On the 23rd, the Shanghai Gold Exchange issued a notice: recent market instability factors are numerous, and precious metal prices are experiencing significant volatility. Investors are advised to be aware of risks, control positions reasonably, and invest rationally.

On the same day, financial institutions such as Bank of China also reminded clients to invest rationally based on their financial situation and risk tolerance, to reasonably control precious metal holdings, and to reduce the impact of short-term price fluctuations through long-term investment, thereby preventing potential losses from market volatility.

Dong Ximiao stated that before clear signs of stabilization appear, close attention should be paid to market trends, especially changes in Fed policy signals, the strength of the dollar index, the latest developments in Middle East tensions, and fluctuations in crude oil prices.

After all, there are no eternal safe-haven assets. When market structures change, traditional investment logic can suddenly become invalid.

(“Sanlihe” Studio)