The Middle East situation remains volatile, with gold rapidly plunging below $4,430 and oil prices continuing to rise.

On the afternoon of March 26, gold and silver prices rapidly plummeted. Spot gold briefly fell below $4,430 during trading, and as of the time of this report, it was $4,429.72/ounce, down over 1.5% for the day; spot silver prices dropped below the $70 mark, currently reported at $69.54/ounce, down over 2% for the day.

At the same time, international oil prices continued to rise. As of the time of this report, WTI crude oil was up over 2%, standing above $92/barrel; Brent crude oil increased by 2.39%, reported at $104.66/barrel.

On the news front, the situation in the Middle East remains turbulent. According to Xinhua News Agency, the Israel Defense Forces issued a statement early on the 26th saying that they had launched large-scale strikes against “Iranian regime infrastructure” in multiple regions, including Isfahan Province in central Iran. The statement did not provide further details. It is currently unclear whether the targets of this Israeli military strike included the Natanz nuclear facility.

Furthermore, according to a report by Xinhua citing Iran’s Tasnim News Agency on the 25th, an anonymous Iranian military source stated that if the enemy attempts to launch a ground operation against Iranian islands or the mainland, or pressure Iran through naval actions in the Persian Gulf and the Gulf of Oman, Iran will open a new front in the Strait of Mandeb.

Huaxi Securities pointed out that gold volatility has significantly increased and position control remains crucial. The implied volatility of gold has risen continuously to 35 since last Thursday, reaching a historical high percentile of 99.4% since 2009. This is due to gold entering a state of sharp decline, awaiting a decrease in volatility. Looking at a longer time frame, the medium to long-term logic supporting gold remains intact: on one hand, with the rapid evolution of the geopolitical landscape, the marginal weakening of U.S. dollar credit, the underlying logic of global central banks’ “de-dollarization” has not wavered; on the other hand, the scale of U.S. debt continues to rise, and the reliance on loose monetary policy remains high, hence there is currently no foundation for a trend reversal in gold prices. The significant correction in gold prices this round is more of a deep correction following a previous overvaluation, and it is expected that the subsequent bottoming and recovery will take a considerable amount of time. The start of a new round of gold market activity may have to wait until expectations for a Federal Reserve interest rate cut are reignited.

Guojin Securities stated that historical experience shows that gold usually performs well in a stagflation environment, but this time the market has concentrated on pricing inflation factors while neglecting the pressure of economic “stagnation.” The U.S. economy has shown signs of slowing growth, and high oil prices may further accelerate the onset of recession. If economic stagnation resonates with a downturn in the capital market, liquidity expectation differences are likely to become a trigger for a rebound in gold. In the long term, the consensus in the market is that the comprehensive national strength of the U.S. is shifting from prosperity to decline, and gold is expected to usher in a new bull market.