Last week (March 16-20), international gold experienced a historic decline, with the spot price of London gold falling by 10.49%—the largest weekly drop since March 1983. On March 23, London gold continued its downward trend, hitting a low of $4,318.83 per ounce, nearly erasing its year-to-date gains. By the time of reporting, its annual increase had shrunk to just about 0.8%. On the same day, major gold brands lowered their prices accordingly. Chow Tai Fook quoted 1,375 yuan per gram, Chow Sang Sang offered 1,370 yuan, and Luk Fook Holdings priced at 1,373 yuan, all reflecting daily declines close to 5%.

In response to the heightened volatility, the Shanghai Gold Exchange issued a notice on March 23 urging member institutions to strengthen risk management and maintain market stability amid unstable factors driving significant price swings in precious metals. Investors were also advised to enhance risk prevention, manage positions prudently, and invest rationally.

How has the sharp drop in gold prices impacted sales? Will the strong upward trend in gold come to an end? In Shui Bei, a major gold trading hub in Shenzhen, reactions varied: some buyers seized the opportunity to purchase, others adopted a wait-and-see approach, and a few regretted buying earlier.

“Gold prices have fallen—come stock up on gold bars!” Recently, several Shui Bei merchants actively promoted their products on social media. By noon on March 23, Shui Bei gold was quoted at 1,012 yuan per gram, down from 1,046 yuan the previous day. One merchant noted that many customers visited over the weekend, adding that the current price level met many buyers’ psychological thresholds.

With gold prices declining for several consecutive days, market participants displayed mixed behaviors. One buyer, purchasing gold for wedding purposes, shared that they had bought three items during the previous dip and added 30 grams during the latest drop. Although bothered by further declines, they considered it a necessary purchase at a relatively low point. Merchants observed that while some clients bought more as prices fell, others feared buying at peaks. Another merchant mentioned that although inquiries were plentiful, actual purchases were limited, as many preferred waiting for further potential declines.

Notably, material suppliers were generally reluctant to sell at low prices, forcing merchants to pay premiums to secure inventory. Separately, the Shenzhen Gold and Jewelry Association issued a guideline on March 18 requiring real-name registration for transactions exceeding 20,000 yuan to ensure payment authenticity.

What triggered this round of declines? On March 18, the U.S. Federal Reserve kept interest rates unchanged between 3.5% and 3.75%. Meanwhile, on March 23, Iran’s Islamic Revolutionary Guard Corps announced military actions against Israeli forces and a U.S. base in Saudi Arabia. Zhan Dapeng, Director of Nonferrous Metals Research at Everbright Futures, analyzed that recent gold market movements have been driven by U.S.-Iran tensions. Each escalation tends to boost oil prices, strengthen the U.S. dollar, increase stock market volatility, and trigger gold corrections.

Zhan identified two key factors behind the drop: disruptions to gold physical flow due to restricted air and sea routes—leading to discounted sales of stranded gold in Dubai—and rising oil prices rekindling global inflation expectations. This may prompt central banks to end loose monetary policies earlier and shift toward inflation control, thereby tightening liquidity and negatively impacting gold.

Looking ahead, Zhan described gold as at a crossroads. If prices fall further, retreating over 20% from recent highs—a threshold often seen as separating bull and bear markets—the multi-year rally could pause. However, if U.S.-Iran tensions evolve into a prolonged conflict, high oil prices may force the Fed to choose between fighting inflation and preventing recession. Such a scenario could reignite gold’s appeal as both a hedge and inflation-resistant asset.