Gold Price Crashes, Bottom Fishers Celebrate! Can the Gold Bull Market Hold?

Why does gold, traditionally seen as a safe haven, fall abnormally during geopolitical tensions?

When the Strait of Hormuz is blocked and global attention is focused on the smoke-filled Middle East, gold—known as the “ultimate safe haven”—not only fails to rally but instead experiences a sharp “dive.” Spot gold prices fell below $4,500, with a weekly decline of over 10%. This price correction has sparked strong demand from both immediate consumers and bottom-fishing investors. On March 22, Beijing Business Daily reporters found that offline jewelry stores were bustling with customers buying for weddings, zodiac years, and holiday gifts, while long-term investors took advantage of the dip to buy gold bars and jewelry gold, leading to booming sales.

While the terminal market is hot, international gold prices are moving counter to expectations, deepening market confusion: why has gold’s safe-haven role failed amid escalating geopolitical conflicts? Can the myth of a “bullish” gold market still hold?

Storefront Investment Gold and Jewelry Gold Both Booming

In late March, Beijing’s weather warmed, and the Shaanxi Gold Jewelry Headquarters on Guang’anmen Inner Street in Xicheng District was more lively than the spring sun. As soon as you entered, the lively chatter at jewelry counters hit you. Transparent glass cases displayed a dazzling array of gold jewelry, with busy sales staff weaving through, weighing, explaining, and processing payments.

On the first floor’s jewelry gold section, an electronic display showed the day’s gold prices. On March 22, the price for pure gold at Cai Bai Jewelry was 1,448 yuan per gram; 999 fine gold was 1,450 yuan per gram; gold ornaments were 1,462 yuan per gram—prices that had already fallen from early March. Customers crowded around the counters, young couples examining wedding bands and necklaces; a few elderly women discussed styles, inspecting craftsmanship with magnifying glasses; others compared different styles for value.

A sales associate explained while tidying the display, “Gold prices have been quite volatile recently, and more customers are coming in than usual. There are two main groups: one is for immediate needs like weddings, zodiac years, or gifts for younger relatives—these customers are less sensitive to price swings and more concerned with style and brand reputation; the other group is investors, mainly looking to buy gold bars during dips, planning to hold long-term for value preservation.”

Meanwhile, on the fourth floor, the investment gold bar section was also bustling, with many investors consulting and purchasing. An electronic display showed recent international gold price trends. On March 22, Cai Bai’s investment gold price was 1,010 yuan per gram, down from around 1,200 yuan earlier in March. Investors gathered around the screen, discussing recent price movements, recording fluctuations on their phones, asking staff about buying procedures and buyback policies, or sharing investment experiences.

68-year-old Liu, a regular in the investment gold section, told reporters, “In 2024, I bought a lot of gold, and by 2025, the price doubled. I caught a good trend. Over the past year, I sold more than 600 grams, making a profit of 690,000 yuan. Recently, prices have fallen back, and some profits have been taken off the table, but I’m not worried.” He smiled, waving his order, and said he bought another 300 grams at the dip, planning to hold and wait for a better opportunity to sell.

Another investor, Aunt Wang, a novice in gold investing, had only bought earrings before and never invested in gold bars. She said she saw recent news of gold price drops and thought it was a good time to buy. She came to look but was unsure how much to buy, lacking experience and uncertain about the right amount of gold to purchase.

Why Traditional Safe Assets Are “Failing”

The saying “buy gold in troubled times” has long been a common investment adage. Historically, geopolitical conflicts have often been catalysts for rising gold prices. When Russia and Ukraine clashed, gold surged within two weeks; similarly, tensions in the Middle East have historically attracted funds into gold as a safe haven. However, despite escalating tensions and the blockade of the Strait of Hormuz, gold prices unexpectedly turned downward, entering a continuous decline. On March 19, spot gold plunged below $4,800, and the next day continued to fall; on March 20, it broke below $4,500, closing at $4,491.67 per ounce, down over 10% for the week. COMEX gold also dropped below $4,500, closing at $4,492 per ounce.

While geopolitical tensions persist, gold prices are falling sharply—an abnormal trend that has shattered market expectations and caused confusion among investors. Why has gold, a traditional safe haven, “failed”? Market analysis suggests that the “failure” of gold’s safe-haven role is due to a shift in the main trading themes.

On the news front, on the morning of March 19, after a two-day Federal Reserve policy meeting, the Fed announced that the federal funds rate target range would remain at 3.5%–3.75%, in line with expectations. This was the second consecutive meeting since 2026 that the Fed kept rates unchanged. The pause in rate cuts, along with a hawkish policy stance, dampened market optimism about rapid rate reductions this year. For non-yielding assets like gold, higher interest rates mean increased holding costs and a stronger dollar, which suppresses gold prices.

Wang Hongying, head of the China (Hong Kong) Financial Derivatives Investment Research Institute, explained that the sharp decline in gold prices was primarily due to a significant change in market expectations of Fed policy. Early in the year, markets anticipated rate cuts, but now the Fed has adopted a pragmatic stance of holding steady. Meanwhile, geopolitical stalemates in the Middle East have driven oil prices higher, and U.S. CPI data in February hit a new high for the year, with lingering effects from high tariffs. Concerns about further CPI increases in March have led the Fed to hold steady. Additionally, the U.S. dollar index has surged past 100, exerting strong downward pressure on precious and base metals. Profit-taking by long positions has also contributed to the decline, along with algorithmic trading triggers and gamma squeeze risks faced by options traders.

Investors Should Avoid Risks and Adopt a Steady Approach

Amid the sharp volatility in gold prices, some investors are taking profits and cashing out, while others see the dip as a buying opportunity. How should different investors adjust their strategies and manage risks in this turbulent market? For those with immediate needs, such as wedding jewelry or gifts, the main goal is not to profit from price swings but to meet practical life demands. Short-term fluctuations have limited impact on their core needs. Conversely, investment-focused investors aim for returns and should adjust their strategies based on market trends, adhering to principles of avoiding herd behavior and maintaining rational planning.

Wang Hongying suggests that the short-term correction in gold may continue for 2–3 weeks, with the trend in April mainly depending on developments in the Middle East, likely fluctuating between $4,400 and $4,600 per ounce. Investors should consider buying on dips gradually, avoiding full positions or leverage. They should also be aware of valuation discrepancies and market liquidity risks, as high volatility and potential bubbles can increase trading risks.

From a macro perspective, the value of gold as a portfolio allocation has become more prominent, with downside risks relatively controlled and upside potential considerable. The process of de-dollarization has strong resilience and is unlikely to reverse easily. Central banks worldwide are expected to continue increasing their gold holdings gradually.

Wang recommends closely monitoring gold’s price movements. When signs of stabilization appear, investors can employ a pyramid strategy: first, establish a 20% position when prices break key levels; second, verify and set stop-loss if prices fall below key levels; third, add 15% on a rebound and new high, then 10% on subsequent breakouts, forming a pyramid with larger bases and smaller tops. This approach minimizes initial risk and allows for scaling up profits.

Regarding specific investment tools, Wang suggests that investors choose based on their capital and trading habits. Bank savings gold allows regular purchases by grams or amounts, similar to a “zero-deposit, fixed withdrawal” model, with low entry barriers and the option to convert to physical gold. Gold ETFs and their linked funds track gold prices via spot contracts, offering convenient trading, liquidity, and low fees. Investors can buy and sell during trading hours, with T+0 settlement. Those without stock accounts can also participate through bank-linked gold ETFs, though with slightly lower efficiency, sharing the benefits of gold price appreciation.

Beijing Business Daily Reporter Song Yitong