Gold Prices Volatile: Have Safe-Haven Assets Lost Their Efficacy?

(Source: Zhangjiakou News Network)

Reporter: Du Yumeng, Han Yu

“I previously invested about 20,000 yuan in savings, and a few days ago, my floating profit exceeded 3,000 yuan. But this time, with the sharp drop in gold prices, I temporarily had a floating loss of 1,000 yuan. Today, I checked again, and my account’s profit turned back into a floating profit. It turns out the gold price rebounded again,” Mr. Yan, who lives in Tianjin, told Securities Daily. He said that recent sharp fluctuations in gold prices have made his mood swing like a roller coaster, but he has not made any further moves and plans to wait and see for a while.

Recently, the intense volatility in gold prices has attracted widespread attention from investors and consumers. Market sentiment has also clearly diverged—some are inclined to “buy the dip,” others prefer to “cash out,” and some like Mr. Yan have decided to wait and see. Where will gold prices go next? How should investors respond to the current market? Securities Daily interviewed multiple experts for insights.

Gold Price’s Year-to-Date Gains Significantly Narrow

Since the beginning of the year, gold prices initially continued their strong trend. The international gold price (using London spot gold as an example) hit a new all-time high on January 29, reaching $5,598.75 per ounce. But afterward, the price paused its upward momentum and fluctuated around the $5,000 per ounce level.

After mid-March, gold experienced a “cliff-like” plunge. Data from Wind shows that from March 17 to March 23, international gold prices fell for five consecutive days, with daily drops exceeding 3% on March 18, 19, and 20. The price even dipped to a low of $4,098.25 per ounce, nearly erasing all gains made this year. However, starting March 24, gold prices rebounded rapidly, rising 1.47% in a single day. As of March 25, the international gold price was still showing a rebound trend, fluctuating around $4,500 per ounce.

On a monthly basis, by the close on March 24, the international gold price had fallen 15.27% in March. Since the start of the year, the overall increase has narrowed to 3.56%.

“Gold’s recent correction was large in magnitude and fast in speed, representing the biggest and quickest adjustment since 2019. The driving factors are also different from before,” said Shi Jialiang, Assistant General Manager of the Production and Finance Development Department at Zhongtai Futures, in an interview with Securities Daily. He explained that recent international geopolitical risks are high, and crude oil prices have surged significantly, which on one hand has cooled expectations of Fed rate cuts, and even led to expectations of a rate hike in 2026. This has strengthened the dollar and US bonds, directly negatively impacting gold. On the other hand, liquidity crisis expectations and global economic crisis fears have increased, fueling market panic and causing capital to flow out of gold, which short-term is bearish for gold. Under these two core influences, gold experienced a sharp decline, but this is still a short-term correction rather than a medium- or long-term adjustment.

Liu Siyuan, Chief Analyst at Lingxiu Finance, also told reporters that compared to past corrections, this decline in gold prices was deep but very rapid. Structurally, it lacked the long-term suppression seen during the 2008 or 2013 “debt crises” combined with “Fed monetary policy shifts.” Instead, it mainly reflects a micro-structural adjustment after the market’s overly bullish stance on gold earlier.

It is worth noting that gold has traditionally been regarded as a safe-haven asset. The recent rise in international geopolitical risks, which caused gold prices to fall instead of rise, has sparked discussions about the “failure” of safe-haven assets.

Liu Siyuan believes that gold’s safe-haven properties have not completely “failed,” but are being suppressed by higher real interest rate expectations and dollar liquidity withdrawal. Currently, gold’s pricing core has shifted from “safe-haven sentiment” to “interest rate expectations and position adjustments.”

Shi Jialiang also said that gold’s safe-haven attribute has not “failed,” but expectations are already priced in. In this context, the short-term trend of gold has run its course. Of course, the medium- and long-term outlook remains positive, but in the short term, other factors are taking precedence. The current core logic for gold pricing still revolves around safe-haven demand, reserve demand, allocation demand, and policy easing influences, with overall bullish implications.

Banks Issue Multiple Risk Warnings

Amid the sharp fluctuations in gold prices, several banks including Industrial and Commercial Bank of China, Bank of China, and China Construction Bank have issued risk warning notices for the precious metals market. For example, ICBC’s announcement urges investors to remain calm and rational, fully assess their risk tolerance, and avoid blindly chasing gains or selling in panic driven by short-term market emotions. From a long-term asset allocation perspective, it recommends “controlling overall exposure, entering gradually, and diversifying investments,” to smooth out phase risks and build a more stable portfolio.

Bank of China stated that to protect the interests of customers holding savings gold, accrued interest gold, account-based precious metals, and related services, customers are advised to be aware of market risks, invest rationally based on their financial situation and risk capacity, control their precious metal holdings reasonably, and reduce the impact of short-term price fluctuations through long-term investment to prevent potential capital losses.

It is understood that, following the significant correction in gold prices, physical gold jewelry sales have also increased. A jewelry store in Tianjin told reporters that recent large price drops in gold, combined with store promotions on weight and craftsmanship fees, have made gold prices more attractive, leading to increased customer purchases.

As noted, with international and domestic gold prices declining, jewelry prices have also been sharply reduced. For example, Chow Tai Fook’s gold jewelry prices, according to data from Juhuasuan, dropped from 1,629 yuan per gram on March 2 to 1,346 yuan per gram on March 24, a decrease of 283 yuan per gram. Although overall prices have fallen significantly, jewelry prices fluctuate widely—almost “daily,” with prices on March 25 at 1,412 yuan per gram, up 66 yuan from the previous day.

How should ordinary investors respond to such volatile gold price movements? Liu Siyuan suggests that in the short term, gold prices are expected to enter a high-volatility bottom-finding phase, with technical signals indicating oversold rebounds. However, a reversal requires easing dollar liquidity pressures or a clear shift in Fed stance to dovish. For investors, cautious waiting is currently recommended.

Shi Jialiang believes that in the short term, expectations of Fed rate cuts have cooled, the dollar index remains strong, and risks and capital flows continue to influence prices. After a sharp decline and rebound, gold and other precious metals are likely to continue adjusting. However, from a medium- and long-term perspective, the four core demands for gold—safe-haven, reserve, allocation, and policy easing—still exist, and the overall upward trend in precious metals may remain unchanged.