Gold is no longer stable. How should I invest now?

Ask AI · How does geopolitics influence short-term gold pricing logic?

China Securities Journal, April 2 — (Zhang Zhihan) on the 2nd, spot gold prices surged and then sharply fell, breaking through $4,800 during trading and quickly dropping below $4,600.

Since the beginning of this year, gold has experienced rare fluctuations from record highs to cliff-like declines. It is often said “buy gold in chaotic times,” but why has gold performed so unstably, showing such large volatility?

Xue Hongyan, a special researcher at Sichuan Commercial Bank, stated that recent sharp fluctuations in gold prices mainly stem from the interplay of multiple factors switching the underlying pricing logic. Initial geopolitical conflicts involving Iran and others did indeed boost safe-haven demand, but as the conflict stalemated, market focus shifted.

Xue Hongyan specifically pointed out that geopolitical events like the Strait of Hormuz drove up energy prices, strengthening inflation expectations, which in turn led markets to shift their expectations of major central banks like the Federal Reserve from rate cuts to maintaining tightening or even raising rates. The strengthening dollar and rising bond yields significantly increased the opportunity cost of holding gold.

“Meanwhile, a global asset sell-off triggered liquidity shocks, with investors prioritizing liquid assets like gold to meet margin calls, amplifying downward pressure on prices. Additionally, related statements from Iran and the U.S. caused market sentiment to fluctuate repeatedly, making traditional safe-haven logic temporarily give way to a complex game involving liquidity, interest rates, and sentiment,” Xue Hongyan added.

Regarding the gold price plunge on the 2nd, Xue Hongyan believes this does not signal a trend reversal. The current volatility has not changed the overall medium- to long-term bullish trend of gold; it should be viewed more as a short- to medium-term phase adjustment. “From a technical perspective, after a significant retracement, gold prices show signs of stabilization and recovery. In the second quarter, the market may mainly oscillate and build a base, with range-bound recovery. In the short term, it remains constrained by geopolitical tensions, oil prices, and the dollar’s movement.”

For investors, Xue Hongyan suggests that short-term gold fluctuations are still quite large, and attention should be paid to the progress of geopolitical conflicts. Long-term allocators can monitor the support from global central bank gold purchases and de-dollarization processes, but should not overestimate their short-term driving power. (China Securities Journal APP)

(The views expressed herein are for reference only and do not constitute investment advice. Investing involves risks; please proceed with caution.)

Editor: Song Yafen, Yuan Yuan, Jia Yifu