Gold price gains wiped out for the year! Institutions say medium to long-term upward support remains

After a sharp rise, a significant decline followed, and gold’s year-to-date gains have been fully wiped out.

Since March, the international gold market has experienced continuous heavy selling, with a “free fall” occurring on March 23. Data shows that spot gold prices repeatedly fell below $4,500, $4,400, $4,300, $4,200, and $4,100 per ounce today, dropping below $4,100 for the first time since November 24 of last year. Intraday, prices plunged as much as 8.7%, erasing all gains for the year. Since the beginning of the year, spot gold had risen nearly 30%, but since March, prices have fallen over $1,000.

On the same day, domestic gold prices generally declined. Domestic spot gold Au9999 was quoted at 923.9 yuan per gram; multiple jewelry brands also lowered their prices, with Chow Sang Sang 24K gold jewelry at 1,367 yuan per gram, down 5.27% intraday; Lao Miao Gold at 1,374 yuan per gram, down 4.91%; Chow Tai Fook at 1,375 yuan per gram, down 4.98%.

In the morning, the Shanghai Gold Exchange issued a notice: recent market instability has been influenced by numerous factors, significantly increasing gold and precious metal price volatility. Market participants are advised to closely monitor market changes, prepare detailed risk emergency plans, and maintain market stability. Investors are also reminded to manage risks prudently, control positions reasonably, and invest rationally.

Regarding the reasons for this round of gold decline, Jin Yidan, head of the Southwest Futures Institutional Department, told reporters that as of March 20, 2026, the weighted price of WTI crude oil has increased about 33% since the outbreak of the war, intensifying global central banks’ concerns over imported inflation, prompting major countries’ central banks to adopt a more hawkish stance.

Jin Yidan pointed out that the Federal Reserve’s FOMC meeting on March 18 decided to keep the federal funds rate target range unchanged at 3.5%–3.75%, but mentioned the possibility of future rate hikes. The subsequent economic forecast also confirmed this hawkish bias: inflation expectations were revised upward, while unemployment and economic growth forecasts were barely adjusted; meanwhile, the dot plot maintained the overall expectation of one rate cut in the next two years, but with a noticeably more hawkish distribution. Subsequently, the Bank of England, European Central Bank, Swiss National Bank, and Swedish Riksbank also decided to keep current rates unchanged, exerting pressure on precious metal prices.

Why has gold’s “safe-haven attribute” failed?

Notably, despite ongoing tensions between the US and Iran since March, gold has not exhibited its usual “safe-haven glow.” Instead, it has been constrained by a strong dollar, consolidating weakly for nearly three weeks. Recently, gold has shown a downward trend, with international prices breaking through eight hundred-dollar levels over four days, hovering above $4,200 before press time.

“Currently, the decline in gold prices has formed a medium-term correction,” said Tang Linmin, senior researcher at China International Futures. He explained that escalating US-Iran tensions could lead to higher inflation expectations and a more hawkish Fed, prompting market sell-offs in gold. If the situation between the US and Iran does not ease or even worsens, the correction may not be over. However, if Iran’s situation sees a major reversal, the correction could end quickly and stabilize.

Xia Yingying, head of the Precious Metals and New Energy Research Group at Nanhua Futures, told reporters that during this Middle East escalation, gold did not rise as usual due to safe-haven sentiment but diverged from the conflict trend. This indicates a conflict between market safe-haven logic and macroeconomic pricing. The reasons include:

First, energy shocks have altered expectations of policy direction, with rising real interest rates suppressing gold prices. Risks in the Strait of Hormuz pushed up oil prices, directly affecting the pace of inflation decline and cooling expectations of Fed rate cuts this year, even raising fears of rate hikes. Rising US Treasury yields and a rebound in the dollar have increased real interest rates, which, for non-yielding gold, results in valuation pressure. Even safe-haven sentiment has been offset by rate factors.

Second, the dollar’s safe-haven status is now more prominent. The dollar, as both a safe asset and with liquidity advantages, benefited from the previous low dollar index, reflecting valuation benefits. As monetary policy expectations turn hawkish, the dollar rebounds, attracting safe-haven funds that might otherwise flow into gold, creating a “rising dollar, falling gold” scenario.

Third, liquidity management and fiscal spending needs in some countries have also triggered gold sales. For example, Russia’s central bank sold gold to cover fiscal deficits; Poland’s central bank sold gold temporarily for defense financing. Additionally, rising oil prices have increased trade deficits and exchange rate pressures in some emerging markets, leading to financial market volatility and liquidity stress, prompting gold liquidation to ease pressure—conflicting with safe-haven demand.

Xia Yingying summarized that the escalation of US-Iran tensions, through the “inflation–interest rates–liquidity” transmission chain, has reactivated traditional macro factors suppressing gold, temporarily disconnecting gold from safe-haven pricing logic.

Long-term support for gold prices remains

Wang Yanqing, chief analyst at CITIC Construction Investment Futures for precious metals, explained that the main factor driving gold prices down currently is liquidity tightening. The escalation of US-Iran tensions has triggered a global asset sell-off, with stocks and bonds both falling sharply. In such an environment, gold is also vulnerable, similar to the situations during the 2008 financial crisis and the 2020 COVID-19 pandemic, when liquidity tightening led to declines in gold prices.

Wang Yanqing admitted that the Fed’s rate cut expectations have weakened significantly due to inflation concerns, reducing short-term support for gold. However, in the long run, factors such as central bank gold purchases and weakening US dollar credit still exist, providing future support. Current liquidity risks are the main market volatility driver. If the global asset sell-off subsides, gold may stabilize. Short-term investors are advised to stay on the sidelines. Considering the medium- to long-term upward momentum of gold, it is prudent to wait for market stabilization before re-entering positions.

The “Economic Information Daily” reports that in the March monetary policy statement, the Federal Reserve indicated that the impact of Middle East tensions on the US economy remains uncertain, with significant downside risks. Fed Chair Powell stated at the press conference that, due to the unclear scope and duration of Middle East impacts and the extent of oil price increases on consumption, the Fed has chosen to observe.

Several interviewees told reporters that the US-Iran situation is a temporary shock to gold prices. Once tensions in the Middle East ease, the Fed’s monetary policy outlook may shift dovishly again, boosting gold prices.

Xia Yingying added that, with the US midterm elections approaching, the likelihood of prolonged US-Iran conflict is low. This suggests limited potential for energy-driven inflation to turn into deep, broad inflation. Moreover, if Kevin Waugh succeeds Powell as Fed Chair, the monetary policy stance may tilt toward rate cuts. Additionally, US employment shows signs of weakening, and liquidity risks in stocks and bonds are rising, making a rate hike by the Fed within this year unlikely. Overall, the long-term upward trend of gold remains intact, with medium-term movements depending on Fed policy.

Yuan Zheng, analyst at Galaxy Futures, told reporters that although recent gold prices have sharply corrected, the overall long-term upward logic remains unbroken. The recent plunge is mainly due to short-term trading shifts. Future Fed policy expectations will influence gold mainly through changes in monetary policy outlooks. If Kevin Waugh takes over as Fed Chair and reduces the pace of balance sheet runoff, the impact on asset prices will be limited. Coupled with ongoing support from de-dollarization and central bank gold purchases, gold prices are still expected to regain upward momentum.

(Source: 21st Century Business Herald)