Mhmarkets Maihui: Not Giving Up Gold for Now

On March 25th, Mhmarkets (Maihui) observed that recently, gold experienced a significant sell-off and erased all its gains for the year. Driven by signals from the U.S. indicating negotiations with Iran, gold rebounded sharply, prompting discussions on whether to abandon gold. Considering the current macroeconomic environment, geopolitical changes, and the core logic of the gold market, Mhmarkets (Maihui) provides an analysis of gold’s short-term fluctuations and long-term value, offering professional insights for market participants.

Specifically, gold previously fell below one of the most severe short-term declines in decades, completely wiping out this year’s gains. Mhmarkets (Maihui) stated that this sharp drop in gold prices was not caused by a single factor. The main drivers include rising energy prices leading to expectations of higher interest rates, a strengthening dollar exerting downward pressure, and physical demand weakening in the Middle East due to supply disruptions. Additionally, profit-taking by institutional investors and sovereign nations added to the downward pressure. The combination of these factors pushed gold prices sharply lower. However, after U.S. President Trump announced on Monday that he would delay strikes on Iran’s energy infrastructure by five days—despite Iran denying negotiations—the market sentiment eased, and gold prices rebounded significantly, highlighting gold’s high sensitivity to geopolitical narrative shifts.

From the core logic of the market, the current global environment features rising nominal yields, a strong dollar, and shifting interest rate expectations. The market has moved from pricing in rate cuts to considering the possibility of small rate hikes, which presents a clear obstacle for non-yielding assets like gold. The outflow of approximately 62 tons of gold via ETFs in March further intensified downward pressure on gold prices. UBS strategists noted that gold does not necessarily rise during initial conflicts; macro forces often dominate its price movements. This view is supported by recent market behavior—despite escalating geopolitical tensions, gold has not experienced the expected large surge but has instead shown volatile swings, confusing many investors.

Mhmarkets (Maihui) believes that in the short term, gold prices will continue to be influenced primarily by Federal Reserve policy stance, geopolitical developments, and the dollar’s movement. If the Fed decisively shifts toward tightening policies and real yields remain high, gold may continue to decline. Conversely, if geopolitical tensions ease further and policy expectations turn dovish, gold could rebound. As a traditional safe-haven asset, gold’s price volatility is also closely related to market sentiment. Currently, market opinions on gold are divided, and fluctuating sentiment can intensify short-term volatility, consistent with Mhmarkets’ previous view that “short-term fluctuations are normal, and long-term gold retains its safe-haven value.”

Overall, Mhmarkets (Maihui) assesses that this significant sell-off in gold is not a structural turning point. It should not be interpreted as a loss of gold’s value but rather as a normal adjustment amid macroeconomic changes. In the short term, gold will likely remain volatile, with close attention needed on Fed policy, geopolitical developments, and the dollar. In the long term, gold remains an effective hedge in a diversified investment portfolio. Its value has not changed, and as economic growth slows and monetary policies gradually loosen, gold prices are expected to gradually recover. Therefore, now is not the right time to abandon gold. Market participants should rationally view short-term fluctuations and strategically plan long-term allocations.