Excited heart, trembling hands, can we really buy the dip?

Ask AI · Why are gold prices crashing in the short term despite long-term logic staying solid?

Spot gold has fallen more than 13% cumulatively in March. The market has described it as an “epic sell-off.” It also recorded the largest one-month decline since 2008 (i.e., over 17 years)—so does the long-term upside logic for gold still hold? Can you really buy the dip? Today, Huihui explains it all to you.

The long-term logic for gold is still there, but it’s no longer “buy blindly and it will rise”

At present, the overall direction of central banks continuing to be net buyers has not reversed. The demand for de-dollarization and diversified reserve allocations has also not disappeared. Gold’s role as a hedge in an asset portfolio is still present, which means its long-term logic is still intact. The problem is that the market today is not trading these slower variables; instead, it is being driven by stronger short-term factors: oil prices, inflation, interest rates, the US dollar, and positioning that has previously become too crowded. As long as short-term pricing power is still controlled by these variables, gold is no longer an asset that “goes up when you buy blindly.”

If there really comes a day when the long-term logic for gold fails, you would at least need to see three things happen:

Global central banks shift from continuous net buying to sustained, broad-based net selling;

The demand for de-dollarization and diversified reserve allocations clearly cools off;

High interest rates and a strong US dollar are no longer just a phase of shock, but enter a cycle that continuously suppresses gold’s medium-term pricing.

As things stand, none of these three have appeared at the same time yet. Gold can still be seen as bullish for the long term, but you can no longer understand it with the “mindless buy-the-dip” mindset. Long-term logic determines the direction; short-term macro conditions and positioning determine the pace.

So gold’s short-term price is falling, but the long-term logic may not be broken. What’s truly broken is the trading environment of “buy blindly and it will rise.”

Is the selling pressure truly exhausted? Look at these 5 signals

Signal 1: Have macro pressures started to ease together—dollar, oil prices, and interest-rate expectations

The core reason this round of gold is being hammered isn’t that gold’s own logic suddenly failed. It’s that after oil prices rose, the market began to worry that inflation could pick up again and that interest rates would stay higher for longer—making the US dollar a stronger safe-haven asset. Therefore, the first signal is whether the US Dollar Index, oil prices, and expectations of no rate cuts this year—or even additional rate hikes—are beginning to recede. If none of these loosen, it’s hard to say that gold’s selling pressure has already been fully used up.

Signal 2: Have gold ETF flows stopped outflowing?

Since the outbreak of the Middle East conflict, global gold ETFs have seen net outflows of $7.9 billion and 54.8 tons over three weeks, mainly from the United States. As long as institutional funds are still withdrawing, it will be difficult to confirm the bottom all at once.

Signal 3: Have passive sellers exited?

Affected by the war, Turkey’s central bank stabilized the exchange rate by selling about $3.0 billion worth of gold last week. This kind of selling—“not actively bearish, but forced to swap for liquidity”—does significant damage to gold prices. As long as this type of selling remains, the bottom is likely to be dragged out.

Signal 4: Has the price stopped falling near key support levels?

The key support range provided by the WGC is $4,090–$4,066 per ounce, corresponding to the 200-day moving average and the 38.2% retracement level of the 2022-2026 uptrend. COMEX gold had fallen to around $4,100 at one point, which is already very close to this range; by March 31, it had returned to about $4,600. The market has already touched an important medium-term support, but whether it forms a true bottom still needs confirmation through subsequent pullbacks that do not break down.

Signal 5: Has crowded positioning been fully washed out?

As of last Friday, the CFTC data compared to the prior week (March 17). Large speculators bought 4,900 more bullish contracts than the previous week; they closed 3,558 bearish contracts. This indicates that large institutional sentiment is still in an “aggressively bullish, trend-following” mode, rather than a pessimistic or cautious waiting state after a washout.

The most intense first wave of panic selling may have already passed, but the key variables that determine whether gold can truly succeed in bottoming out—dollar, interest-rate expectations, ETF flows, and passive selling—have not all turned better at the same time.

What should ordinary people do?

For ordinary investors, gold is more suitable to be understood within an asset allocation framework rather than simply treated as a straightforward dip-buying trade.

Gold’s long-term logic and its short-term price are not the same thing. In the long run, it benefits from central bank allocations, diversified reserve holdings, and safe-haven demand. In the short run, however, gold prices are often dominated by oil prices, the US dollar, interest-rate expectations, and market positioning. This means that even if the long-term direction is correct, the short-term may continue to fluctuate.

Instead of fixating on “whether it’s the absolute lowest point,” it’s better to focus on how you participate: keep your position lighter, move at a slower pace, and replace a one-time bet with staged entries. This approach better matches the characteristics of assets like gold and is more suitable for ordinary people.