EJFQ Analysis | Gold Price Plunges from High Crossover Bull-Bear Line at Risk

The Middle East situation remains uncertain. The Hang Seng Index touched the “bull-bear dividing line” 250-day moving average three times in March, which has held for 250 days, along with the 25,000-point level. Yesterday, the market was immediately breached at the open, dropping over 1,000 points at one point, closing at 24,382 points, with turnover increasing to nearly HKD 370 billion. The gold sector was the hardest hit, and its decline is not limited to a single day. According to the EJFQ system, all gold stocks with a market value over HKD 100 billion have fallen more than 30% from their one-year highs, mainly due to the sharp drop in gold prices.

Last Friday, gold closed at $4,492.42 per ounce, down 10.5% for the week, the worst since March 1983. Yesterday during the Asian session, it continued to be sold off, falling to $4,099.17, wiping out all gains of about 30% since 2026.

In fact, the “bullish gold” trend peaked and reversed as early as the end of January when gold reached a historic high of $5,595.47. This coincided with U.S. President Trump’s decision to nominate former Fed Governor Waller as the new Fed Chair, introducing uncertainty into interest rate outlooks. However, at that time, gold and silver prices were extremely overbought: exceeding the 200-day moving average by 40%, a phenomenon rarely seen since the 1980s, likely due to crowded trades and overextended gains leading to a collapse.

After about a month of consolidation, investors hoped for a rebound of the “golden bull” and a new rally, but the outbreak of conflict in the Middle East caused an abnormal trend. Gold failed to serve as a traditional safe haven and continued to find a bottom. Recently, the decline has widened, and the Federal Reserve’s stance is also a factor. Last week, Fed Chair Powell, who is ending his term in May, adopted a hawkish tone. U.S. easing policies could be halted by soaring oil prices and rising inflation, giving gold prices back the “interest rate magic.”

As shown in the【chart】, gold prices have “plummeted” this month. In the short term, the moving averages offer little support; the 10-day moving average has fallen below the 50-day moving average, forming a “death cross,” and entering a technical bear market. The “bull-bear dividing line” is also close. Entering the market at current levels is a high-risk activity akin to “catching a falling knife,” but it could also be a rare buying opportunity.

Of course, before investing, a few points need clarification. First, if you believe the “bull market” has ended and a long-term bear market is coming, it might be better to short the market. Second, if the recent decline is purely due to short-term oversold rebounds (perhaps Trump’s actions amid market turmoil?), then it’s important to recognize the unusual volatility lately, and to have a clear strategy and risk control in place. However, if you believe that the earlier “devaluation trade” driving gold prices remains the main trend—especially as geopolitical tensions persist, and countries’ finances worsen, leading to continued erosion of currency values (particularly the dollar)—physical assets like gold can hedge risks. Central banks are likely to actively increase gold reserves, making gold an essential component of diversified portfolios in the medium to long term.

By the way, half a century ago, during the U.S. stagflation period, gold prices surged more than 7 times (this cycle’s maximum increase is 2.5 times). Additionally, if half of the countries’ reserves shift to gold, gold prices could “break 10,000.” Any of these scenarios would be enough to send the “bullish gold” trend into overdrive again. As for interest rates or liquidity shortages, investors will have to rely on other tools within their portfolios (such as high-yield stocks) to make up for it.

ICBC Investment Research Department

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