Diving! The bottom-fishers keep getting trapped as they buy more. Can gold return to an upward trend?

Why Did Gold’s Safe-Haven Properties Fail During the Conflict?

Reporter Chen Shan

On March 19, Beijing time, the international spot gold price suddenly plummeted sharply, breaking through the key levels of $4,800/ounce and $4,700/ounce in a short period, reaching a new low since February 6. That evening, the decline continued, and the gold price further fell below the $4,600/ounce mark. Around 9 PM that night, the gold price approached $4,500/ounce. Since the outbreak of the US-Iran conflict on February 28, the cumulative maximum decline in gold prices has exceeded 15%.

The sudden drop in gold prices not only shattered the market’s inherent perception of gold’s safe-haven properties but also caught a large number of investors eager to “buy the dip” off guard.

On social media platforms, discussions about being “caught in the dip” are rapidly escalating. Many investors have shared screenshots of their accounts showing recent gold purchases, accompanying them with self-deprecating comments: “I thought it was a good time to buy the dip, but it turned out to be buying at a high.” “The more it falls, the more I buy; the more I buy, the more I’m trapped; my mindset has completely collapsed.” Similar messages flooding the screens reflect the collective anxiety of ordinary gold investors amid this rapid decline in gold prices.

Many investors feel confused: gold is regarded as a safe-haven asset, so why is the price falling amidst escalating geopolitical conflicts? Those who shouted “it’s time to buy gold” and chose to buy more as prices fell received a harsh lesson from the market. Right now, their biggest concern is: should they hold on, can gold prices rise again?

“Caught in the Dip”

Xiao Qi is one of the many members of the “buy-the-dip army.”

“Recently, gold prices have been fluctuating around $5,000/ounce; I’ve been paying attention for nearly a week, just waiting for a chance to buy on a pullback,” Xiao Qi, an office worker, told the Economic Observer reporter. As an ordinary investor, she has always been optimistic about the medium to long-term trend of gold, especially after noticing that several banks have implemented dynamic limits on gold accumulation services, worrying that it would become more difficult to buy in the future. Therefore, she kept an eye on gold prices and planned to accumulate gold as part of her asset allocation.

On the morning of March 19, Xiao Qi checked the market and found that the international gold price had dropped significantly to around $4,800/ounce, which corresponded to a decline in domestic gold accumulation quotes. She believed “the time to buy the dip had arrived.”

“At around 9 AM, I decisively bought 12 grams of gold accumulation from a certain bank, with the purchase price around 1,082.6 yuan/gram, plus a 6 yuan handling fee, putting my holding cost at about 1,089 yuan/gram.” Xiao Qi recalled that she was very optimistic when she made the purchase, thinking that a rebound in gold prices would allow her to make a profit, even calculating that if the price rose as expected, she could take profits in time.

However, the market did not develop as Xiao Qi had expected. Starting around 2 PM, the international gold price suddenly began to plunge, and the quotes for gold accumulation continued to decline. “I checked my phone almost every few minutes, watching the price drop little by little, and my heart sank.” Xiao Qi said that by the time she got off work around 5 PM, the gold accumulation quote had dropped to about 1,050 yuan/gram, and her holding had an unrealized loss of about 500 yuan. What was even more anxiety-inducing was that there were no signs of a bottoming out in international gold prices.

Also caught in “buy-the-dip anxiety” is Ms. Liu, an investor in ETFs (Exchange-Traded Funds).

“It’s been falling for more than half a month; when will gold prices ‘take off’?” Ms. Liu told the Economic Observer reporter. In the past two years, she had missed the opportunity to profit from rising gold prices due to hesitation. Recently, seeing continued instability in international conditions, she judged that gold still had room to rise and decided that “this time I couldn’t miss out again.” Starting from early March, she continued to buy gold ETFs in batches, adhering to an operational mindset of “buying more on big dips and buying a little on small dips,” trying to capture rebound opportunities amid market fluctuations.

However, after several rounds of increased holdings, gold prices did not rebound as expected but instead continued to decline. Ms. Liu laughed bitterly, saying that almost every time she bought, she was caught in a loss, “the more I buy, the more it falls; the more it falls, the more I buy. I thought I was building a position in batches, but now it looks more like I’m being trapped in batches.”

Why Did the Safe Haven Fail?

With the continuous escalation of geopolitical conflicts, why has gold, viewed as a safe-haven asset, continued to decline? This is not only the confusion of retail investors but also the contradiction in the current market.

On the afternoon of March 19, Wang Jun, chief expert at Great Wall Futures, stated in an interview with the Economic Observer that short-term macro factors such as “global inflation heating up—high interest rates—strong dollar” have overshadowed the traditional safe-haven logic of gold. Coupled with the resonance of funding behavior and technical adjustments, this has led to gold prices falling instead of rising.

Specifically, the US inflation data has surged, reinforcing the necessity for high interest rates. According to statistics, the US February PPI (Producer Price Index) rose by 3.4% year-on-year (expected 3.0%), marking the largest increase since July 2025; the core PCE (Personal Consumption Expenditures Price Index) expectation was raised to 2.7%. Additionally, the current Middle Eastern conflict has sharply increased oil prices (Brent surpassed $110/barrel), intensifying concerns about imported inflation. The market has determined that the Federal Reserve prioritizes anti-inflation over stable growth.

On the other hand, the Federal Reserve’s March meeting was entirely hawkish. The latest results from this week’s Federal Reserve meeting show that the US has maintained interest rates at 3.5%—3.75% for the second consecutive time. The dot plot indicates only one rate cut, with seven officials expecting no cuts until 2026.

Furthermore, both interest rates and the dollar have strengthened, directly suppressing gold prices. The latest 10-year US Treasury yields have risen to over 4.25%, and the dollar index has stabilized above the 100 mark. The strengthening dollar has further pushed down gold prices priced in dollars.

From the perspective of funding behavior, gold prices rose over 25% in the first half of the year, accumulating a large number of profit-taking positions at high levels. Ahead of the Federal Reserve’s meeting, bulls actively reduced their positions to secure profits. Additionally, there has been a significant outflow of funds from gold ETFs, intensifying market selling pressure.

“Amid the escalating US-Iran conflict, the gold market is facing contradictory sentiments,” said Zhan Dapeng, director of non-ferrous research at Everbright Futures, to the Economic Observer. The rebound in oil prices has raised inflation expectations, which is beneficial for gold prices, but it may also cause central banks worldwide to delay monetary easing, leading the market to worry about liquidity risks arising from significant fluctuations in financial markets.

Huaxia Fund analysis suggests that the continuous decline in gold prices since March, viewed as a safe-haven asset, is primarily due to: gold hedges against “credit collapse” and “out-of-control inflation,” but not against “liquidity drying up” and “deflation.” The current market’s main hidden concerns are: first, the marginal deterioration of liquidity; second, the psychological impact of sanctions from geopolitical warfare has significantly weakened compared to the freezing of Russian assets in 2022.

This institution believes that the tight monetary shocks faced by gold are more temporary, and the long-term logic of geopolitical conflict and central bank gold purchases has not been shaken or reversed. The medium to long-term upward momentum of gold continues, but in the short term, it still needs to wait for risk release.

Can It Rise Again?

Currently, rather than focusing on why gold prices have “fallen” in the past, investors are more concerned about whether gold prices “can rise again” in the future.

Regarding gold price trends, the latest analysis from GAIN Capital points out that since the outbreak of the Middle Eastern conflict, safe-haven funds have clearly favored oil and the dollar, while gold has continued to retreat from high levels and has fallen below the 50-day moving average. Both technical trends and news suggest a bearish outlook for the short term.

Wang Jun believes that in the short term, the decline in rate cut expectations and rising inflation create downward pressure on gold prices. However, the People’s Bank of China has continuously increased its gold holdings for 16 months, providing a bottom support for gold. In the long term, if the Middle Eastern geopolitical conflict ends and central banks around the world begin a new round of rate-cutting cycles, leading to a decline in real interest rates, combined with a global reconfiguration of credit and accelerated de-dollarization, gold prices will rise again. “It is recommended to closely monitor developments in the Middle Eastern geopolitical conflict, energy price fluctuations, and monetary policy adjustments by various central banks, as these will be the key factors determining future gold trends,” Wang Jun added.

In Zhan Dapeng’s view, the current market’s main focus will still be on geopolitical aspects. The blockade of the Strait of Hormuz directly threatens 20% of global oil supplies. If military conflicts spill over to energy facilities and oil prices continue to rise, funds will be forced to return to gold to hedge against the risk of uncontrolled inflation. If inflation spirals out of control, real interest rates will also return to a declining path, further stabilizing gold prices.

Zhan Dapeng believes that whether trading inflation expectations or stagflation expectations in the future, gold’s strategic allocation position will be enhanced, and under the influence of liquidity concerns, it will instead provide investors with opportunities to allocate at lower prices.

CITIC Securities’ latest research report points out that the mid-term trend of gold prices after each Middle Eastern conflict still depends on dollar credit and liquidity factors. Looking ahead to this round of conflict, it is expected that the continuation of liquidity easing and weakening dollar credit will continue to drive up gold prices.

Wang Xiang from Bosera Fund believes that the US’s military strike against Iran has not achieved short-term results like that in Venezuela and may be dragged into a long-term tug-of-war, coupled with insufficient protection for allies in the Middle East. This is a serious blow to the foundational pillars of the dollar system. Therefore, after short-term liquidity pressures ease, gold is still expected to return to the narrative logic of de-dollarization.