As the ongoing escalation of the conflict between the United States and Iran, the so-called “safe-haven asset” gold not only failed to break out of the safe-haven trend but instead suffered continuous drops. Under the dual pressure of the energy crisis triggered by the war in the Middle East and the expected rate cut by the Federal Reserve, the once “safe-haven paradise” has turned into a “cash machine” for institutional fund withdrawals.
During this round of adjustments, spot gold has been on a downward trend for several trading days since mid-March, with the cumulative decline rapidly expanding. The total decline over the past two weeks is close to $1,000, with last week seeing the most severe weekly drop in gold since March 1983. On March 23, spot gold once plunged below $4,100, falling nearly 9% intraday, marking the longest continuous decline since October 2023.
According to Dahe Finance, as a result of this impact, the domestic retail gold market prices have been fluctuating rapidly, with prices dropping by tens of yuan per gram in a single day, causing domestic gold prices to fall below 1,000 yuan per gram for the first time in 2026.
On that day, in Zhengzhou’s Guancheng District, known as the “Central Plains Shuibe”, the gold market was crowded with people, and trading emotions were visibly intensifying. Several stores reported rapid price changes, with the real-time price at checkout being the determining factor. The number of consumers purchasing gold jewelry notably increased, with some customers preparing for wedding celebrations deeming the prices suitable for purchase. However, the drastic price fluctuations also prompted some merchants to suspend the sale of investment gold bars to avoid losses.
On March 25, the Yangcheng Evening News reported that during an investigation of the Shuibei gold market in Shenzhen, a couple soon to be married expressed regret over missing out on a gold necklace.
After experiencing a ten-day consecutive drop in spot gold and significant violent fluctuations, some investors used the term “monkey market” to describe the current market – prices jumping up and down, extreme volatility, difficult to discern direction, increasing the difficulty for ordinary investors to operate, as blind chasing highs and lows can easily lead to significant losses.
Qiu Rui, Senior Deputy Director of the Research and Development Department at Orient Gold Trust, believes that the core incentive for the current sharp drop in gold prices is the escalation of the Middle East geopolitical conflict driving up oil prices, triggering market inflation rebound expectations, subsequently causing a significant decline in expectations for a Federal Reserve rate cut, leading to a simultaneous rise in US bond yields, ultimately resulting in a global dollar liquidity tightening.
Dr. Qin Jian, Visiting Professor at the Birmingham Business School, analyzed that this round of sharp decline in gold prices is more like a “liquidity stampede” triggered jointly by high real interest rates, repricing of inflation, and leveraged dispositions, rather than a complete collapse of the long-term value logic of gold.
Li Xunlei, Chief Economist of Zhongtai International, analyzed that the global money supply has increased by 160 times in the past 60 years, which is the fundamental driving force for the long-term rise in gold prices. Li Xunlei suggested that investors should rationally allocate gold, avoiding blindly chasing highs, preventing risks, and not missing out on trends. He also cautioned against investment risks: “Holders need to withstand volatility.”
Chen Hao, Professor at the School of Economics and Trade of the University of International Business and Economics, advised that ordinary consumers should strategically allocate gold assets through long-term investments rather than short-term arbitrage speculation. “Gold prices fluctuate significantly, and recent risks are more pronounced. Trying to exploit short-term price differentials carries very high risks. Consumers can adopt a phased and gradual buying and selling approach, not recommending the use of a high proportion of family assets to purchase gold, and furthermore, not advocating leveraged investments.”