Gold prices have recently shown significant fluctuations, drawing market attention.
Internationally, as of the close on March 21, Beijing time, COMEX gold fell below the $4,500 per ounce mark, settling at $4,492 per ounce, marking a daily decline of 2.47% and a cumulative weekly drop of over 10%. Domestic gold prices followed the downward trend. By the close on March 20, the main contract for Shanghai gold futures was quoted at 1,016.12 yuan per gram, down 1.22%.
Affected by the decline in gold prices, domestic jewelry brands have generally reduced the prices of gold jewelry. On March 22, brands such as Chow Tai Fook, Chow Sang Sang, and Luk Fook Holdings lowered the price of pure gold jewelry to below 1,400 yuan per gram.
Regarding this round of gold price decline, Yu Xiaoming, Senior Investment Advisor at Shaanxi Jufeng Investment Information Co., Ltd., stated that the primary reason is the Federal Reserve's strong hawkish signals, which have significantly cooled market expectations for interest rate cuts. The rise in the U.S. dollar and Treasury yields has put pressure on non-yielding gold.
On March 19, Beijing time, the Federal Reserve announced it would keep the target range for the federal funds rate unchanged between 3.5% and 3.75%. This marks the second consecutive time the Fed has held rates steady this year.
Lou Feipeng, a researcher at China Postal Savings Bank, believes that besides the impact of the Fed's hawkish signals, geopolitical conflicts driving up oil prices and intensifying inflation concerns have diverted safe-haven capital to the U.S. dollar and crude oil, reducing demand for gold investments. Additionally, profit-taking from previous high levels has contributed to multiple negative factors leading to the adjustment in gold prices.
"Short-term gold prices are likely to remain under pressure with volatility. In the medium term, if the Federal Reserve begins cutting interest rates, leading to lower real interest rates, combined with support from central bank gold purchases and ongoing geopolitical risks, gold prices are expected to resume an upward trend," Lou Feipeng said regarding the future movement of gold prices. From a long-term perspective, influenced by factors such as supply-demand gaps, gold prices are still likely to show an upward trend.
Qu Rui, Senior Associate Director of the Research and Development Department at Golden Credit Rating, believes that gold prices will follow a trend of "short-term pressure, medium to long-term improvement." In the short term, high oil prices will likely lead the Fed to maintain higher interest rates for longer, supporting a strong U.S. dollar and continuing to suppress gold prices. In the medium to long term, as the effect of rising oil prices diminishes and inflation gradually recedes, the Fed's interest rate cut cycle, though delayed, will eventually occur. Coupled with stable gold purchase demand from central banks and the weakening credibility of the U.S. dollar, gold prices are expected to fluctuate and rebound.
"For the short term, it is recommended that investors maintain a wait-and-see approach, avoiding the risks of bottom-fishing and waiting for confirmation of support levels. For the medium to long term, focus should be placed on key catalytic factors such as the timing of Fed rate cuts and developments in the geopolitical situation," Qu Rui stated.