Gold and silver prices advanced once again. During trading on March 25th, as signals emerged suggesting a potential easing of tensions with Iran, the US dollar index weakened, leading to significant strength in the precious metals market. At the time of writing, spot gold had risen over 2%, while COMEX gold futures climbed nearly 3%. Spot silver increased more than 3%, and COMEX silver futures surged over 5%. In the A-share market, gold-related concept stocks also saw collective movement, with Chifeng Gold, Xiaocheng Technology, Xingye Silver Tin, and Zhongjin Gold all posting substantial gains. How will gold prices perform moving forward?

Precious metals experienced a collective upswing today. By the latest update, spot gold was up 2.10% at $4,566 per ounce, and spot silver had gained 2.73% to $73.22 per ounce. Futures markets registered even larger increases, with COMEX gold futures rising 3.73% to $4,566 per ounce and COMEX silver futures jumping 5.57% to $73.45 per ounce.

A-share gold concept stocks collectively surged. As of 1:20 PM, Chifeng Gold was up nearly 7%, while Xiaocheng Technology, Shengtun Mining, Xingye Silver Tin, and Shengda Resources all gained over 5%. Hunan Silver, Zhongjin Gold, Zijin Mining, and Baiyin Nonferrous advanced more than 4%, and Shanjin International and Sichuan Gold rose over 3%.

Reports previously indicated that the United States is seeking a one-month ceasefire to facilitate negotiations with Iran. On the 24th, US President Trump told media at the White House that the US and Iran are engaged in talks, and Iran has "agreed to forever abandon nuclear weapons." The previous day, Trump stated that dialogue had occurred between the US and Iran. However, this claim was promptly and explicitly denied by Iranian officials.

Israel's Channel 12, citing informed sources, reported on the 24th that a US-proposed agreement aimed at ending the war encompasses 15 key points, including an Iranian commitment never to develop nuclear weapons and opening the Strait of Hormuz as a "free sea lane." The New York Times, quoting knowledgeable officials, reported that this plan had been delivered to Iran via Pakistan. It remains unclear whether Iran will accept it as a basis for negotiations or if Israel agrees with its contents.

Additionally, The Wall Street Journal, citing Arab officials and a US official familiar with the discussions, reported that mediators from Turkey, Egypt, and Pakistan are working to arrange a meeting between US and Iranian officials within the next 48 hours, although the positions of the two sides remain far apart.

How will gold prices move subsequently? Over the past ten-plus trading days, gold prices experienced a significant decline. On Monday this week, spot gold fell below $4,100 per ounce at one point, dropping more than 20% from its early March high. Rising energy prices fueled by the Middle East situation have heightened inflation risks, leading investors to bet on higher interest rates. This creates headwinds for gold, which bears no interest. Declines in global stock and bond markets have also forced investors to sell gold positions to raise cash, further amplifying the drop in gold prices.

Like most asset classes, gold has experienced sharp volatility as traders grapple with a series of war-related headlines. Even as Trump claimed negotiations to end the conflict were underway, fierce fighting continued between the US-Israel alliance and Iran.

Frank Monkam, Head of Cross-Asset Macro Strategy and Trading at Buffalo Bay Commodities, stated that a hawkish repricing of US monetary policy expectations and the resulting stronger US dollar from higher yields are among the drivers of the recent gold price correction. Monkam indicated that more critically, gold price volatility has been exacerbated by retail investor deleveraging and selling from emerging market participants, including central banks, who are liquidating gold to bolster foreign exchange reserves amid high oil prices.

On Tuesday, Bloomberg reported that the Turkish central bank had discussed conducting gold-for-foreign-currency swap transactions in the London market, possibly to defend the lira against volatility related to the Iran conflict.

Despite recent weekly declines, gold had previously undergone a prolonged uptrend, supported by geopolitical and trade tensions, as well as strong central bank purchases. Some countries that accumulated gold are energy importers, meaning rising oil and gas bills due to the war reduce the dollars available for reinvestment in gold.

Guotai Haitong Securities pointed out that gold prices have continued to weaken recently. On one hand, this is due to gold's previous significant gains, which may face liquidity shocks from capital outflows when risk appetite decreases. On the other hand, market expectations for monetary policy tightening leading to higher real rates also weigh on gold. In the short term, gold may remain under periodic pressure influenced by the Iran situation. However, if long-term inflation expectations rise, the environment could turn favorable for gold again. The logic for medium to long-term gold appreciation remains solid. Opportunities to allocate to gold during oscillating declines should still be monitored.

Zhaoyin Research suggests that the future trajectory of gold is highly dependent on the evolution of the US-Iran conflict and can be analyzed through three scenarios:

Scenario 1: Prolonged Strait Blockade. If the conflict escalates and the Strait of Hormuz is blocked long-term, oil prices would continue to surge, potentially triggering stagflation concerns reminiscent of the 1970s and even shaking market confidence in US fiscal credibility. In this case, after a short-term tightening shock, gold would see buying opportunities due to its "sell US/anti-stagflation" properties.

Scenario 2: US-led Quick Resolution. If the US rapidly gains dominance or a ceasefire is reached relatively quickly between the US and Iran, oil prices could peak and then fall. Interest rate hike expectations would then be revised. Gold would likely break free from the current downtrend and return to its original path of moderate appreciation.

Scenario 3: Inflation Without Stagnation. If high oil prices only boost inflation but the US economy demonstrates resilience (similar to the 2022 Russia-Ukraine conflict), the market would continue pricing in rate hikes, and gold would likely enter a downward channel.

In summary, the short-term market is pricing the most certain inflation trade, and the downside risks for gold are still being realized. Medium-term focus should be on the duration of the war's evolution and its impact on the economy. Whether persistently high oil prices will impose a "stagnant" impact on the economy is key to determining if gold can reverse its trend.