Gold prices give up year-to-date gains as markets worry about inflation in developed economies

Source: Securities Times

Securities Times reporter Zhao Liqing

“Prices for gold fell quite a bit the past couple of days, but today they haven’t fallen further. It’s a good time to buy.” On March 24, a salesperson at a Zhou Sheng Sheng store in Zhengzhou’s Erqi business district told the reporter that although the brand’s jewelry gold price that day was 1350 yuan per gram, the store had a discount promotion, bringing the effective price per gram to only around 1280 yuan.

Gold prices fall sharply

One month ago, Zhou Sheng Sheng’s quoted price for brand-name gold jewelry was about 1590 yuan per gram, with a drop of 15% over the past month.

The price fluctuations of brand-name gold jewelry closely track the international gold price trend. On March 24, the London gold price hit a low of 4300 US dollars per ounce, and the previous day’s low touched 4098.25 US dollars per ounce. Although prices rebounded slightly, as of March 24, London’s gold price had only risen by about 2% year-to-date, and the sharp selloff in the past few days has nearly erased the year-to-date gains.

In mid-to-late March, global financial markets generally fell across the board. Besides energy and chemical commodities, other commodities and US Treasury bonds also declined, and gold—an asset considered a safe haven—was no exception. As of March 24, the COMEX (New York Commodity Exchange) gold futures April contract and London gold spot monthly contracts both posted declines of more than 17%, while COMEX silver futures and London silver spot also fell as much as around 28%. At the same time, base metals—whose prior rally had been strong—also saw major adjustments. Among them, LME (London Metal Exchange) copper prices have fallen by more than 9% within three months.

Middle East conflict beyond expectations

When asked about the overall high-level pullback in precious metals and base metals in recent days, Cheng Xiaoyong, deputy general manager of the research center at Guangzhou JinKong Futures, believes the reasons are multifaceted.

First, the Middle East conflict has lasted longer than expected. Market logic has shifted from inflation caused by disruptions in oil supply to a global economic recession. Triggered by the two oil crises, in the 1970s, major global economies generally fell into stagflation, marked mainly by sharply rising inflation, declining consumer spending, shrinking industrial production, and a clear slowdown in economic growth. Research by the IMF (International Monetary Fund) shows that if energy prices rise by 10% and last for one year, global inflation would increase by 40 basis points, while economic growth would slow by 0.1%—0.2%.

At the same time, high oil prices have led markets to expect the Federal Reserve to pause easing and possibly even turn to tightening next year. As expected by markets, the Federal Reserve’s March meeting paused interest rate cuts, and the dots (dot plot) released after the meeting showed that in 2026 there would be only one 25-basis-point rate cut. Even one official reportedly expects one rate hike next year. For most assets—especially precious metals and base metals—higher real interest rates will inevitably raise holding costs. As of March 23, the yield on the 10-year TIPS (Treasury Inflation-Protected Securities) used to measure US real interest rates broke above 2%, the first time since July 21, 2025.

In addition, the market will sell off some assets to ensure liquidity. As markets worry that inflation will rebound in developed economies, and as the Fed pauses rate cuts, expectations of tighter dollar liquidity and a broad decline in financial markets have triggered a crisis in the private credit market. Investors have continued to sell off the assets they hold—including stocks and gold—to obtain liquidity and reduce leverage.

Cheng Xiaoyong also believes that high oil prices create another concern: central banks in various countries may sell off some gold because high oil prices could shock economies through inflation and disruptions to import payment capacity. For base metals such as copper, the trading logic differs somewhat. For new energy materials such as copper and lithium carbonate, the market may first reflect the demand shock and only later reflect supply issues. A similar logic applies to the sharp pullback in silver—though it is the demand shock from solar photovoltaic. However, because the Gulf region is a major global producer of primary aluminum, with output accounting for about 7% of the world’s total, aluminum will first reflect the supply shock.

Looking ahead, Cheng Xiaoyong expects that the continued duration of the Middle East conflict remains a key factor determining the trajectory of commodities such as base metals and precious metals. He believes that although the Middle East war has lasted longer than expected, both the US and its allies and Iran are under multiple pressures, and the conditions for reaching an agreement are becoming increasingly mature. However, the recovery of oil supply still needs time. As the market’s recession-based logic fades, it will return to the logic driven by technology such as AI, the de-dollarization trend, and shortages in base metal supply. Base metals and precious metals will gradually stop falling, while gains in energy and chemical commodities will likely ease and could even see a significant pullback. From a trading-strategy perspective, with markets experiencing dramatic volatility, both long/short strategies carry risks; the focus should be on good risk hedging, and it is not advisable to take a heavy position in one-directional bets.

Future outlook: potential to regain an upward trend

Zhuochuang Information precious metals analyst Huang Jiaqi believes that gold’s safe-haven attributes and role as an “asset ballast” still exist, but the repeated fluctuations in price have, to some extent, weakened market investment confidence. Moreover, macro news on both the bullish and bearish sides remains unclear. The subsequent trend still needs to track several factors related to the Fed’s monetary policy: whether the evolution of the Middle East situation continues to push up energy costs; whether the global tariffs Trump had imposed earlier need to be refunded; whether the new tariff framework can be implemented; and how the US Nonfarm Payrolls report and March CPI data guide expectations for rate cuts. He suggests that investors broadly should, based on their own risk tolerance, manage position sizes reasonably and invest cautiously.

“Currently, the market generally believes that precious metals are in a pattern of ‘near-term pressure, long-term optimism.’” Huang Ting, an analyst at the Shanghai SteelLink lead-zinc information department, said that in the short term, before the Fed’s monetary policy turns and while geopolitical conditions remain unclear, precious metal prices may continue to trade with a sideways-to-downward, pressured tone. The market needs time to digest the impact brought by hawkish policies and wait for new signs that conditions are stabilizing. In the medium to long term, the foundation supporting a gold bull market has not been shaken. Factors such as central banks continuing to buy gold, the de-dollarization trend, and ongoing long-term concerns about the dollar’s credibility still exist. Many institutions believe that the current deep pullback is a normal market adjustment. Once market sentiment stabilizes, gold prices still have the potential to regain an upward trend.

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