Gold prices have successively broken through 4500, 4400, 4300, 4200, and 4100 dollars. Why has the safe-haven function "failed"?

Within one day, the spot gold price repeatedly fell below $4,500, $4,400, $4,300, $4,200, and $4,100.

After nearly a 10% decline in international gold prices and over 14% in silver prices last week, on March 23, international gold and silver prices plunged sharply again. Specifically, the spot gold (London Gold) price in intraday trading repeatedly broke through the $4,500, $4,400, $4,300, $4,200, and $4,100 per ounce levels.

Wind data shows that, as of press time, spot gold fell 5.93% to $4,225.21 per ounce, having dropped over 8% to $4,098.25 per ounce at one point during the day; spot silver (London Silver) declined 6.42% to $63.54 per ounce, with a drop of over 10% at one point.

In futures markets, as of the time of reporting, COMEX gold was at $4,159.2 per ounce, down more than 9%, a 9.09% decline. COMEX silver was at $62.74 per ounce, down 9.95%.

In the domestic market, as of March 23 close, the main Shanghai Gold futures contract 2604 broke through key technical levels of 1,050 yuan/gram and 1,000 yuan/gram, indicating a downward break. The closing price was 940 yuan/gram, down 8.62%.

Shanghai Gold and Shanghai Silver also closed lower. Shanghai Gold closed at 938.58 yuan/gram, down 9.62%; Shanghai Silver at 15,541 yuan/kilogram, down 13%.

It is worth noting that although gold performed well earlier this year, after multiple recent corrections, both spot and futures prices have erased the gains accumulated since the beginning of the year, with some decline.

Looking back historically, during previous oil crises that caused oil prices to rise, gold prices often trended upward. Why is gold and silver performing so differently this time? Why has gold’s safe-haven attribute “failed”? What will be the future trend of gold prices?

Facing multiple pressures such as profit-taking and rising real interest rates

Market opinions suggest that the weakness in precious metals prices is mainly due to the large gains earlier, rising real interest rates, and a diminished safe-haven effect.

Specifically, regarding profit-taking, Huafu Securities stated that gold has performed outstandingly among various assets in 2025 and has attracted market attention. Its correlation with risk assets has increased, leading to amplified volatility. Signs of overseas geopolitical conflicts have already appeared in negotiations and pressure, and combined with earlier gains, funds may be selling to realize profits and exit.

Guotai Haitong Securities pointed out that gold’s previous rally was driven by speculative capital, showing characteristics similar to risk assets. As geopolitical tensions escalate and risk appetite declines, liquidity outflows can easily impact gold prices.

“The current round of gold correction is mainly driven by continued outflows of funds from the Americas. Investment enthusiasm for gold in the Americas is highly correlated with expectations of interest rate cuts. As monetary policy expectations shift and concerns about rate hikes increase, downward pressure on gold during the American trading session is more evident,” Guotai Haitong Securities further explained.

Regarding real interest rates, Dongwu Securities analyzed that as overseas disturbances intensify, major central banks signal hawkish policies, and tightening monetary conditions heat up globally, long-term government bond yields rise sharply, putting pressure on gold and silver prices.

“Among them, the more hawkish Bank of England’s tightening expectations have strengthened the pound and euro, while the US dollar index has performed relatively weakly. As a result, there was a period when the US dollar index and gold prices moved downward together. The reason behind this is that, as a globally priced asset, gold is not only influenced by US real interest rate expectations but also by global real interest rate expectations,” Dongwu Securities stated.

Guotai Haitong Securities also noted that real interest rates have risen significantly under market expectations of monetary tightening, and as a non-yielding asset, gold is also suppressed by rising real interest rates.

“On the safe-haven front, the safe-haven rally in gold had already begun to ferment in late February when overseas geopolitical tensions escalated. After actual conflicts occurred overseas, profit-taking demands from ‘selling the fact’ weakened gold’s safe-haven attributes,” Guotai Haitong Securities further explained.

It is worth recalling that historically, during previous overseas geopolitical conflicts that led to oil crises and sharp increases in oil prices, gold prices generally showed an upward trend. However, in this round of oil price increases, gold has performed quite the opposite.

In this regard, Shenwan Hongyuan Securities noted that before 2000, the US was a net importer of oil, and rising oil prices were negative for the US current account, leading to a falling dollar index and rising gold prices. “But after 2000, the US became an oil exporter, and rising oil prices benefited the US current account, causing the dollar index to rise and gold to come under pressure.”

“The key point is that, compared to oil crises, rising oil prices tend to temporarily boost the dollar index, which is marginally negative for gold,” Shenwan Hongyuan Securities explained.

The foundation of the gold bull market remains

Despite the current headwinds such as profit-taking, rising real interest rates, and rising oil prices, institutions remain cautiously optimistic about gold’s medium- and long-term prospects.

For example, Guotai Haitong Securities clearly stated that the foundation of the gold bull market still exists. If overseas geopolitical conflicts escalate further in the short term, energy prices may spike again, amplifying concerns about inflation and tightening monetary policies by major central banks, which could temporarily pressure gold.

“However, if oil prices remain high for a prolonged period, it could significantly boost inflation expectations. At that time, the Federal Reserve might find it difficult to raise interest rates quickly due to concerns about economic slowdown, and real interest rates could fall amid rising inflation, which would be positive for gold,” Guotai Haitong Securities pointed out.

Additionally, regarding trading strategies, Guotai Haitong Securities believes that if oil prices stay high for a long time, market focus might shift from monetary tightening to stagflation (low growth and high inflation), providing room for gold to rise. “Therefore, in the long term, the logic for a sustained increase in gold prices remains solid, and investors can still consider gold allocation during periods of volatility.”

Shenwan Hongyuan Securities also emphasized that a short-term oversold rebound in gold does not necessarily indicate a trend reversal. The recent sharp decline in gold prices was mainly driven by overseas geopolitical tensions and hawkish Fed signals, which caused liquidity shocks in a liquidity-crisis environment, leading to a mispricing of gold. If geopolitical tensions ease temporarily and oil prices retreat from high levels, and liquidity shocks ease, there could still be opportunities for a bullish position in gold.

“Secondly, the US economy’s intrinsic growth momentum is weaker than during the Russia-Ukraine conflict in 2022. The Fed’s actual rate hikes this year are likely to be limited, and the dollar may rebound to a range of volatility after a short-term rally, easing pressure on gold,” Shenwan Hongyuan Securities further explained. “Moreover, if oil prices continue to rise sharply in the mid-term, potentially triggering a global recession, and expectations shift toward systematic rate cuts, gold could also find support.”

Huafu Securities also stated that after liquidity shocks, the long-term support for gold remains. On one hand, central bank gold purchases provide solid backing for prices. On the other hand, if overseas geopolitical conflicts persist, they could deplete dollar confidence and promote de-dollarization.