The gold market has hit a sharp brake.
On October 22, international gold prices weakened rapidly. As of press time, London spot gold was quoted at $4,090.75 per ounce, down 1.19% intraday, falling below the $4,100 per ounce psychological threshold, with an intraday low of $4,066 per ounce.
The futures market weakened in tandem. As of press time, COMEX gold futures fell 1.22% intraday to $4,099.2 per ounce, also losing the $4,100 per ounce integer mark, with an intraday low of $4,082.4 per ounce, confirming a clear pullback trend.
The magnitude of this correction is significant. Gold prices had staged a strong rally in early August before reversing sharply. As of press time, London spot gold has accumulated a pullback of over 10% since reaching a阶段性 high on August 25; measured from the yearly peak on January 29, the cumulative decline approaches 25%, signaling a rapid cooling of the gold market.
Why the decline
"Gold's recent weakness is primarily constrained by Federal Reserve tightening expectations," analyzed Chen Mengyun, an analyst at Shenyin & Wanguo Futures.
From the transmission chain perspective, Chen Mengyun believes that Middle East geopolitical tensions have pushed up international oil prices, reinforcing inflation risks and thereby raising market expectations for Fed rate hikes, which weighs on non-yielding assets like gold.
According to The New York Times, citing U.S. officials and others briefed on related discussions, U.S. and Israeli militaries have formulated specific plans to potentially strike Iran again after the U.S. midterm elections. The recurring U.S.-Iran conflict keeps oil prices elevated, further fueling upside inflation risks.
Chen Mengyun further noted that the market widely expects the Fed to keep rates unchanged at its October meeting, but the option for a rate hike this year has not been closed, with December hike expectations rising. Monetary tightening expectations continue to suppress gold pricing.
Zhang Pengyuan, a researcher at PaiPaiWang Wealth, added that rising real U.S. Treasury yields have increased the opportunity cost of holding gold, with market pricing of Fed policy shifting further from "delayed rate cuts" toward "possible rate hikes." Combined with the substantial prior gains in gold prices, concentrated profit-taking has created selling pressure, jointly driving the sharp pullback.
Short-term pressure
Looking ahead, interviewed experts generally believe that short-term and medium-to-long-term logics are diverging.
Kang Daozhi, chairman of Daozhi Investment, believes that short-term gold prices are suppressed by interest rate expectations and will likely remain range-bound and weak, unable to sustain a one-directional trend. Close attention should be paid to U.S. inflation and Treasury yield movements. In the medium to long term, continued gold purchases by global central banks and high U.S. debt levels provide a floor for gold prices, but a recovery still awaits the Fed's rate-cut inflection point. Only when real interest rates decline can gold prices repair, and the probability of a deep decline is low.
Chen Mengyun holds a similar view. She stated that in the short term, the high-rate, strong-dollar environment is unlikely to reverse quickly, and oil prices and inflation risks will continue to suppress gold's rebound space. The market will likely remain range-bound, with subsequent focus on Middle East geopolitical developments, U.S. inflation data, and Fed policy signals. In the medium to long term, the repricing of U.S. debt credit risk continues to drive global reserve diversification. The trend of global central bank gold purchases remains unchanged, and combined with the return of allocation funds to gold ETFs (exchange-traded funds), this jointly builds solid bottom support for gold prices.
Zhang Pengyuan also believes that gold prices are short-term dominated by the dollar and Treasury yields, likely maintaining high volatility and weak range-bound trading. In the medium term, the pace of inflation decline is key; if inflation cools and rate-cut expectations recover, gold prices could see a repair rally. In the long term, supporting factors such as global geopolitical uncertainty and continued gold purchases by multiple central banks remain, constraining downside space.
Regarding investment value, from the current point, Chen Mengyun believes that gold's safe-haven attributes and allocation value for hedging dollar credit risk still exist. She recommends investors adopt a phased dollar-cost averaging approach, manage positions well, and strictly adhere to stop-loss discipline. Given significantly increased market volatility, she does not recommend using leverage to speculate on short-term moves.
On allocation, Zhang Pengyuan suggests adopting a phased dollar-cost averaging strategy with small additions on dips, prioritizing instruments like gold ETFs with good liquidity and controllable costs.
Kang Daozhi also believes that gold is an asset hedging tool, not a high-yield product. After the pullback, its allocation cost-effectiveness has improved, but short-term uncertainties remain, making heavy positions inadvisable. He recommends allocating 5% to 10% of a portfolio, building positions in batches on dips; preferring gold ETFs while avoiding high-leverage overseas markets and futures; and closely tracking U.S. core PCE (Personal Consumption Expenditures price index) and 10-year Treasury real yields.
Sina's partnered large-platform futures account opening is safe, fast, and secure. Sina disclaimer: This message is reprinted from Sina's partner media. Sina publishes this article for the purpose of conveying more information and does not imply endorsement of its views or confirmation of its descriptions. The article content is for reference only and does not constitute investment advice. Investors operating based on this do so at their own risk.
Comments