From March 16th to 10:00 a.m. on March 17th, Beijing time, the international gold price (London spot gold) continued to test the significant $5,000 per ounce level. This marks the third time since the beginning of March that the $5,000 threshold has been contested.

As a result, gold ETFs and gold stock ETFs in the domestic market experienced notable declines. Concurrently, the share prices of gold-related stocks showed increased volatility. During the morning session on March 16th, several gold stocks faced selling pressure, with their secondary market prices falling over 7% at one point.

Amid the battle between bullish and bearish forces, several interviewed institutional representatives indicated that short-term price fluctuations are driven by risk spillover from the US-Iran conflict. The recent sharp volatility in gold prices requires more time for the market to digest.

Regarding the core drivers of the gold price increase, interviewees unanimously stated that factors such as sustained central bank gold purchases, the weakening credibility of the US dollar, and the commencement of the Federal Reserve's interest rate cutting cycle have not fundamentally reversed. The logic supporting a medium to long-term upward trend for gold remains intact.

Inflation Concerns and Revised Rate Cut Expectations Weigh on Gold "The recent drop below $5,000 per ounce for international gold is primarily due to two reasons," said Qu Rui, Senior Associate Director of the Research and Development Department at Oriental Gold.

Qu Rui believes that on one hand, the escalating US-Iran conflict, showing no signs of easing, is pushing crude oil prices higher. This is likely to increase global inflation expectations, forcing markets to reassess the monetary policy paths of major central banks.

"Particularly with the Federal Reserve's March FOMC meeting occurring these days, persistently rising oil prices could reinforce the Fed's stance on maintaining high interest rates, thereby putting pressure on gold prices," Qu Rui emphasized.

On the other hand, Qu Rui analyzed that last week's significant weakness in the US stock market sparked liquidity concerns, leading to a stronger US dollar, which also disturbed the gold market.

Wang Zheng, General Manager of Shangyi Fund, provided further analysis, stating that the international gold price's repeated fluctuations around the $5,000 level and the substantial pullback in gold stocks are essentially due to several factors. Besides short-term oil price increases fueling inflation worries and a market reassessment of rate cut expectations, normal profit-taking after a price surge is also contributing to the adjustment.

Ye Peipei, a Fund Manager at ZhongOu Fund, also believes that rising stagflation expectations are a factor. Since March 16th, the market has begun pricing in economic stagflation expectations triggered by the sharp rise in oil prices.

"On one hand, there's a liquidity-driven decline due to short-term crowded trades. On the other hand, a strong US dollar and high oil prices are pushing back expectations for interest rate cuts, suppressing gold prices. Therefore, the recent pressure on precious metals is mainly due to market concerns about negative feedback on risk asset prices under high oil price conditions," Ye Peipei stressed.

Gold Price Still Has Potential for Further Gains "Although gold prices and gold stocks are under short-term pressure from the aforementioned factors, none of these constitute a reversal of the bull market logic for gold," Wang Zheng concluded.

In Wang Zheng's view, the core drivers for higher gold prices—sustained central bank buying, weakening US dollar credibility, and the Fed's rate-cutting cycle—are long-term trends that remain unbroken.

Qu Rui also concurred: "The recent sharp volatility in gold prices requires time for the market to digest. However, if international conflicts persist, inflation and economic growth will face more significant impacts, likely increasing market demand for gold."

"In the short term, gold prices are likely to consolidate and churn around $5,000, digesting market positions. Once sentiment and positioning stabilize, gold still possesses the momentum for further upward movement," Wang Zheng predicted.

Regarding the outlook for gold stocks, Wang Zheng believes that because they exhibit both sensitivity to gold prices and stock market sentiment, their pullbacks can be significantly larger than gold's price drops once bullish expectations cool, representing an expected value regression.

Ye Peipei suggested that under conditions of high oil prices and a gloomy economic outlook, the probability of stagflation increases, potentially creating investment opportunities for gold.

Taking a longer-term perspective, Ye Peipei noted that for the two decades prior to 2022, real interest rates were indeed the dominant factor influencing gold prices—falling US real rates led to rising gold prices, and vice versa.

"In recent years, frequent large-scale global geopolitical conflicts, coupled with expanding US fiscal deficits eroding trust in the US dollar, have led institutions and central banks to increasingly use gold as a hedge against dollar credibility. This is evidenced by persistent and determined central bank gold purchases from 2022 onwards," Ye Peipei highlighted, pointing to a shift in gold market dynamics.

Ye Peipei stated that simply using the real interest rate model to explain gold prices is now ineffective—it fails to account for the substantial annual gains over the past four to five years, which are actually driven by new, sustained buying interest.

Ye Peipei also observed a change in 2025: global gold ETFs have shifted from net outflows during 2022-2024 to net purchases.

"This indicates that not only central banks but also institutional and individual investors are flocking to the gold market. This reflects a growing recognition of gold's role in hedging against declining US dollar credibility, leading to asset reallocation. Fundamentally, the pricing still hinges on changes in US dollar credibility. If the weak US dollar cycle persists, it's difficult to call a top for the gold bull market," Ye Peipei forecasted.

Based on this assessment, Wang Zheng further analyzed different gold investment products.

Wang Zheng believes gold ETFs and physical gold are suitable as core portfolio stabilizers. Investors should not fear short-term volatility and can consider accumulating positions during adjustments. However, it's important to note that on-exchange gold ETFs have shorter trading hours, leading to lower intraday volatility but more frequent overnight price gaps. Physical gold is constrained by storage costs and lower liquidity, requiring careful evaluation of the necessity of direct ownership.

Additionally, Wang Zheng cautioned that gold stocks and gold stock ETFs offer higher potential returns but also greater volatility and drawdowns. They are essentially equity assets, not pure substitutes for gold. Blindly buying the dip is not advisable; investors should wait for gold price expectations to stabilize before entering positions, strictly controlling position size and volatility risk.