Gold remains protected at $4,600 per ounce, and the long-term "de-dollarization" trend continues | Market Watch

Since April, gold has once again fallen into a correction. On April 2, London gold briefly came close to $4,550 per ounce. On April 6, gold opened sharply lower, but it still held steady above $4,600 per ounce.

Previously, London gold briefly broke below $4,100 per ounce on March 23, and the cumulative correction at one point reached 30%. Since the rebound at the end of March, has the correction already ended? Can gold sustain the prior uptrend?

In the view of industry insiders, in the short term gold is still in a range-bound market. But in the medium to long term, the broader trend of “de-dollarization” will continue, and the factors that support gold to move higher have not changed.

Li Zhongliang, an investment manager at the Cheese Fund, told First Financial that there is no clear signal that the situation in the Middle East has cooled, meaning the war may still continue. The market therefore falls into a cycle of “expectations easing” and “risk continuing,” leading to sharp fluctuations in the gold price.

“Although short-term volatility is intense, gold’s long-term outlook has not been reversed. What’s happening now is more like experiencing staged consolidation, building up energy for further gains in the future. The long-term core logic lies in the ‘de-dollarization’ trend, which provides a safeguard for the stability of gold prices.” He added that on the technical side, after the gold price rebounded to a key level of $4,800 per ounce, it saw a rapid pullback, showing that there is heavier selling pressure overhead. Coupled with the back-and-forth of the war, gold prices in the short term are still in the consolidation phase, awaiting clarity on the situation. The overall performance in the second quarter is expected to be mainly range-bound bottoming, with changes in geopolitical risk as the key focus.

However, he believes that from a long-cycle perspective, the sharp short-term volatility may also present opportunities to build positions in batches.

Wu Lixian, a strategist at Everbright Securities International, analyzed that over the next few weeks the market may remain relatively volatile. The gold price’s trajectory is closely tied to the Middle East situation. If the conflict heats up over the next two weeks, gold prices may still be affected. In addition, gold prices have rebounded from around $4,100 to about $4,700, with a relatively large cumulative rebound. With the price currently at a relatively high level in the short term, investors may consider waiting for the price to pull back before making new arrangements.

Wu Lixian believes that the long-term uptrend in gold prices has not changed, and there hasn’t been much change in the logic behind the rally.

“The medium- to long-term logic for gold hasn’t been broken,” Zhou Junzhi, Chief Macroeconomic Analyst at CICC Credit, said. In March, gold once saw the largest single-week decline since 1983. Concerns about the Strait of Hormuz being continuously blocked kept rising. The Fed’s hawkish stance also weighed on gold prices, and the safe-haven attributes of precious metals temporarily failed. This requires waiting for a clearer signal from the interest-rate path.

Zhou Junzhi believes that gold’s price action has not moved outside its framework. Once the impact of liquidity on gold prices fades, gold can again follow medium- and long-term logic. As the U.S. dollar’s position weakens and the internationalization of the Chinese yuan rises markedly, it represents a systematic repricing reconstruction for gold.

(This article comes from First Financial.)