Gold jewelry prices suddenly drop sharply! Is gold "reversing" and waiting for everyone?

Since March, the gold market has been experiencing a “late cold snap.”

Just as consumers lament that gold prices are too high to reach, the market suddenly turned sharply downward, with prices plunging significantly, directly falling back to levels from a month ago. For novice players accustomed to gold “only rising and not falling,” recent feelings have been a roller coaster along with gold prices.

Data from the Dewu App shows that gold prices have fallen back to levels from a month ago. As of March 19, the prices of gold jewelry and gold bars have decreased by nearly 10% compared to a month earlier. The price of Lao Feng Xiang pure gold碎碎冰 ring (0.7g) dropped from 1,037 yuan a month ago to 1,008 yuan, a 3% (29 yuan) decrease, and 7% (72 yuan) below the recent peak of 1,080 yuan. The Chinese Gold butterfly pendant (0.6g) fell from 1,032 yuan a month ago to 1,022 yuan, a 1% (10 yuan) decrease.

On March 20, reporters visited a shopping mall in Beijing and found that many jewelry store staff said that with gold prices falling, the number of customers visiting for purchases had significantly increased.

Wang Peng, a researcher at the Beijing Academy of Social Sciences, told Securities Times that the price of gold jewelry falling below levels from a month ago and nearly 10% below this month’s peak reflects a sharp adjustment in market expectations for Federal Reserve monetary policy. The strengthening dollar, rising inflation expectations, and cooling expectations for rate cuts have exerted downward pressure, while profit-taking from earlier gains has intensified short-term volatility. Although gold prices face short-term pressure, ongoing central bank gold purchases, geopolitical risks, and currency credit risks still support gold.

Data from the Dewu App shows that gold bar prices have fallen 2% compared to a month ago. The Chinese Jewelry gold bar (1g) dropped from 1,339 yuan a month ago to 1,319 yuan, a 2% (20 yuan) decrease, and 8% (120 yuan) below the peak price of 1,439 yuan this month. Lao Feng Xiang 5g gold bars fell from a peak of 7,000 yuan this month to 6,675 yuan, a 5% (325 yuan) decrease.

This roller coaster has sparked lively discussions among young users. Some buyers who held high positions earlier lament the “pain,” while the long-waiting “wait-and-see” crowd is eager to jump in.

CITIC Securities analysts pointed out that the gold sector is expected to reach new highs again. Historically, after Middle Eastern conflicts, the medium-term trend of gold prices still depends on the US dollar’s credibility and liquidity factors. Looking ahead at this round of conflict, the continuation of loose liquidity and weakening dollar credibility are expected to keep pushing gold prices higher. Historically, valuation or stock price percentile advantages have strengthened the upside potential of the gold sector. Currently, the PE valuation levels of leading companies have fallen to a historic low of 15-20 times, and considering that recent stock and gold prices have been highly synchronized at peaks, a new high in gold prices is expected to drive related stocks to new highs.

CITIC Construction Investment’s research report indicates that after the US-Iran conflict, gold prices weakened, which can be understood from four dimensions. Historical experience shows that after geopolitical conflicts erupt, gold prices tend to perform weakly overall, with declines being the norm; their rise is more likely before the conflict erupts. The hedging effect of gold against US stocks is not as strong as imagined; in fact, in recent years, gold prices have been highly correlated with US stocks. Under the current decline of US stocks, holding gold does not provide protection. In the short term, the US dollar index and US bond yields rising also exert some downward pressure on gold. Gold surged at the beginning of the year, with volatility soaring to historic highs, and market sentiment may be cautious in the short term. Based on the historical maximum decline of gold after the Iran-Iraq war, there may still be a 5% downside. As US stocks stabilize, the overall market sentiment may recover, possibly requiring conflict de-escalation; volatility continues to normalize.

Proofreading: Yang Shuxin