Gold prices fall below $4,500, leading to a decline in Hong Kong gold stocks. Zijin Gold International drops nearly 8%.

Ask AI · Why has gold volatility soared to historical highs?

Financial Associated Press March 26 (Editor Hu Jiarong) Due to recent dramatic fluctuations in international gold prices, Hong Kong gold stocks have shown weak performance.

As of the time of writing, Zijin Mining International (02259.HK) is down 7.90%, Zhenfeng Gold (01815.HK) is down 6.40%, Shandong Gold (01787.HK) is down 5.93%, and Zijin Mining (02899.HK) is down 5.50%.

It is noteworthy that the current spot gold price has fallen below the $4,500 per ounce threshold, ending the previous rebound trend.

Volatility Soars to Historical Highs, Institutions Call for Strict Position Control

The latest research report from Huaxi Securities indicates that the volatility in the current gold market has significantly increased, fundamentally changing its risk characteristics. Data shows that implied volatility for gold has been rising continuously since last Thursday, with the latest reading reaching 35. This level is at the 99.4th historical percentile since 2009, indicating that the market is in an extremely unstable “high-risk zone.”

In the face of such extreme volatility, institutional investors generally recommend adopting defensive strategies. Huaxi Securities emphasizes that until volatility shows a significant decline, investors should strictly control their positions to avoid blindly bottom-fishing. The current market is in a state of “sharp decline,” and waiting for the volatility curve to stabilize is a more rational choice. High volatility often accompanies disordered price fluctuations, making cash liquidity more important than aggressive speculation.

Gold Price Decline Leads to Cooldown in Consumption, High-End Brand Foot Traffic Plummets

The decline in gold prices has an immediate impact on the terminal consumption market. According to a March 25 report by Jiemian News, a field visit to various old gold shops in Shanghai and Shenzhen revealed that the once-normal “queue buying” scenes have disappeared, and the storefronts are quite deserted. Other nearby brand gold shops have also seen a significant drop in foot traffic, with consumers exhibiting strong wait-and-see sentiments.

The price transmission mechanism is reshaping consumer behavior. Since early March, domestic spot gold prices have quickly fallen from nearly 1,200 yuan per gram to below the 1,000 yuan per gram mark. Citibank’s research report analyzes that the sharp decline in gold prices will directly impact the “price-sensitive” client demand for high-end brands like old gold shops. This customer group accounts for about 40% of the brand’s revenue in the first quarter, and fluctuations in their purchasing power will exert substantial pressure on corporate short-term earnings. The psychological expectation of buying high and not buying low puts terminal sales in a phase of cold winter.

Why Has There Been a Dramatic Adjustment in Gold This Time?

In response to this phenomenon, Robin Brooks, a senior researcher at the Brookings Institution and former chief foreign exchange strategist at Goldman Sachs, has proposed three core explanatory theories, revealing the deeper logic behind the market:

Retail Trading Behavior Transformation: From Safe Haven to Risk Asset

Since the outbreak of the U.S.-Iran conflict, the true driving force in the precious metals market has undergone a structural change—massive inflows of retail traders. The frantic rise in gold prices before the war attracted a large number of retail investors who had never ventured into this field.

However, the entry of this group has altered the trading attributes of gold, causing it to exhibit more characteristics of a “risk asset” rather than a traditional “safe haven asset.” This explains why gold has declined when oil prices surged (which typically favors safe havens), as well as the recent rapid rebound and subsequent sell-off due to easing market expectations.

Profit-Taking Concentration: Locking in Gains Amid Uncertainty

After a significant rise from the end of 2025 to the beginning of 2026, many holders have accumulated substantial profits. As geopolitical uncertainties increase and market sentiment shifts, rational investment behavior tends to “lock in gains.” This widespread profit-taking activity has created strong selling pressure, becoming a significant force in suppressing gold prices.

Liquidity Squeeze Effect: Chain Reaction Triggered by Margin Calls

The overall increase in market volatility has led to losses in positions of other assets (especially hedge funds), triggering margin call notifications. To cope with liquidity crises, investors are forced to sell profitable positions to free up cash, with gold being a relatively liquid asset at the forefront. This passive deleveraging behavior of “selling profits to cover losses” further exacerbates the decline in gold prices.

(Financial Associated Press, Hu Jiarong)