Gold prices fluctuate sharply, and gold ETF holdings shrink! What's the outlook moving forward?

International gold prices continue to decline, and the “safe-haven halo” of gold assets shows signs of loosening in the short term.

Recently, international gold prices have become more volatile. On March 23, the spot price of international gold briefly fell below $4,100 per ounce, but the day saw significant fluctuations, closing above $4,400 per ounce. As of press time on March 24, the spot price of international gold hovered around $4,400 per ounce.

Meanwhile, gold ETF funds have also weakened. As of March 23, the overall size of gold ETFs shrank noticeably over the past week. Specifically, by March 23, gold ETFs showed a phased outflow, with some leading products reducing their holdings by over 20 billion yuan. On the equity side, gold stock ETFs were also affected, with top products decreasing by more than 3 billion yuan, indicating a cooling of market appetite for gold industry chain investments.

Overall, as gold prices fluctuate at high levels, the previously accumulated trading congestion is beginning to release. Coupled with some funds taking profits, short-term volatility of gold assets has significantly increased. Future gold price movements will still be influenced by multiple factors such as global liquidity conditions, real interest rates, and geopolitical risks.

Short-term Gold Market May Continue to Fluctuate

According to Xin Yuan Fund, current crude oil prices remain high, leading many central banks to adopt hawkish stance in recent meetings. The global central bank super week has concluded, with meetings held by the US, Japan, UK, Canada, and several emerging economies. Federal Reserve Chair Jerome Powell stated in last week’s press conference: “In the short term, rising energy prices will push up overall inflation, but it’s too early to judge the scope and duration of their potential impact on the economy.”

Xin Yuan Fund believes that, in the short term, under the backdrop of escalating geopolitical tensions and rising global stagflation risks, central banks’ hawkish signals and market rate hike expectations are pushing nominal interest rates higher than inflation expectations, leading to rising real interest rates and significant adjustments in gold prices. Additionally, current gold volatility remains high, making large positions in bottom-fishing unadvisable; it’s better to wait for volatility to subside before re-entering. In the long term, the cracks within the Western camp, geopolitical shifts, declining dollar credibility, and the long-term narrative of central bank gold purchases have yet to reverse, so gold and silver still hold medium- to long-term allocation value. Overall, this week’s gold market may see continued fluctuations.

Yao Yuan, senior investment strategist at Oriental Heritage Asset Management’s Asia Research Institute, emphasizes the need to distinguish between short-term fluctuations and medium- to long-term outlooks for gold. In the short term, geopolitical conflicts and the energy price shocks they trigger are the main drivers of the global “risk-off” trading environment. Under these conditions, investors tend to cash out of their portfolios. To free up funds amid the clouds of war, investors often reduce holdings across all assets, especially those that have performed well recently.

Under this trading logic, selling pressure impacts gold. Thanks to strong rebounds in January and February, gold remains one of the best-performing assets so far this year; however, the buying activity mainly benefits the US dollar, especially cash holdings, rather than government bonds. Therefore, if someone hopes that gold will precisely rebound like a pendulum every time risk assets are sold off, they will be disappointed—because gold is not a perfect short-term safe haven.

Gold Investment Still Has Long-term Resilience

Yao Yuan believes that, over longer cycles, gold’s ability to resist geopolitical, macroeconomic, and policy risks is well documented. They maintain an overweight position on gold. Despite recent sharp price swings, this does not change its long-term structural value.

Yao explains that the logic of gold allocation can be viewed from three dimensions: First, the US dollar is in a structural downtrend. Under the pressures of “double deficits” (fiscal and trade deficits), overvaluation, and capital outflows, the dollar’s status as the world’s primary reserve currency is being challenged. Gold, as a hard asset that does not rely on any sovereign credit, naturally serves as a hedge against dollar depreciation.

Second, geopolitical risks have become the norm. The Middle East conflicts are just a microcosm of global geopolitical tensions. Against the backdrop of “de-dollarization” becoming a strategic choice for many central banks, gold’s role as the ultimate safe-haven asset is being reshaped. Central banks worldwide have been increasing their gold reserves for years, but private sector gold holdings remain below 3%, indicating a huge demand gap.

Third, traditional stock-bond portfolios are losing effectiveness. The classic “60/40” investment approach (60% stocks, 40% bonds) faces challenges in the current environment, as the correlation between US Treasuries and US equities has turned positive, and bonds no longer serve as a “safe harbor” hedge. When both stocks and bonds come under pressure, investors need new “stabilizers.”

Editor: Yang Yucheng

Layout: Wang Yunpeng

Proofreading: Yang Lilin