(Economic Observation) Gold Price Breaks Below $5,000 Mark, "Safe-Haven Halo" Temporarily Fades

China News Service Beijing, March 16th (Tao Siyue) — On March 16th, the spot gold price briefly fell below $5,000 per ounce and fluctuated around this level. Since the US and Israel attacked Iran, international oil prices have surged, safe-haven trading has intensified, risk assets have declined across the board, and global stock markets have experienced turbulence. As a safe-haven asset, why has gold not risen but fallen in price?

The underlying logic can be summarized as a transmission chain: rising energy prices — increased inflation expectations — decreased Federal Reserve rate cut expectations — a strengthening dollar.

A recent research report from Huayuan Securities states that gold and silver prices have recently shown wide fluctuations, with overall weakness. The main reason is the escalation of the Middle East situation, which is gradually evolving from localized military conflicts into a global energy crisis.

Specifically, the US has launched strikes on Iran’s strategic oil export hub, Kharg Island. Iran’s Supreme Leader, Ayatollah Khamenei, issued a statement vowing to continue blocking the Strait of Hormuz in response to the US. Oil prices responded with an increase.

Recently, consumers tried on gold jewelry at Beijing Caishikou Department Store Co., Ltd. Due to fluctuations in international gold prices and other factors, gold products have attracted consumer attention. — China News Service reporter Zhang Xiangyi photo

Rising energy prices mean higher living costs, which in turn intensifies inflation concerns. Citigroup research pointed out that due to the Middle East situation limiting aviation fuel supplies, jet fuel prices have recently surged significantly, which will lead to higher airfares in 1 to 3 months. In the short term, market inflation expectations have risen in tandem with oil prices.

Rising inflation expectations weaken market expectations for rate cuts by the Federal Reserve and other major central banks. The market generally believes that at the upcoming Federal Reserve meeting, the likelihood of rate cuts is decreasing. As a result, investors tend to hold higher-yield dollar assets rather than non-yielding gold.

Data shows that the US dollar index has recently strengthened and stabilized above 100, with capital flowing into dollar assets, directly squeezing gold investment. Additionally, the previous sharp rise in gold prices has accumulated a large amount of short-term profit-taking, and before the Federal Reserve meeting, some funds have chosen to exit and wait, increasing selling pressure.

Global central banks have also slowed their gold accumulation. The World Gold Council recently announced that by January 2026, the net official gold purchases worldwide reached 5 tons, significantly less than the monthly average of 27 tons in 2025, indicating a cooling of official sector demand for gold in the short term.

Looking ahead, many institutions believe that gold will remain volatile in the short term. A research report from GF Securities states that oil prices are expected to continue rising slowly in the short term before entering a high-level fluctuation period; gold prices are likely to fluctuate in the short term, with long-term prospects awaiting new narratives; and the US dollar index will benefit fully and may continue to rise.

However, some analysts believe that gold still has medium- to long-term support. Founder Securities states that, in the medium to long term, if inflation expectations gradually clarify and the Federal Reserve’s rate hike space is limited, precious metal prices are expected to rise.

According to Qu Rui, Senior Vice President of the Research and Development Department at Orient Securities, geopolitical uncertainties and the reconfiguration of the international monetary order have not fundamentally changed, so the medium- to long-term allocation value of gold remains prominent. It continues to be a core asset for hedging against global systemic risks. (End)