Geopolitical tensions in Iran have roiled the broader commodity landscape, with international oil prices surging significantly, yet gold prices have moved in the opposite direction. During Asian trading on Friday, May 15, spot gold once fell nearly 1% to around $4,607.30 per ounce.
The chief precious metals analyst at HSBC believes that gold's current price movement does not deviate from fundamentals, as physical demand remains robust, particularly supported by strong institutional gold purchases from a major Asian economy. Simultaneously, the historical correlation between gold and oil prices has been fundamentally reshaped. By 2026, gold is exhibiting characteristics more akin to a risk asset. Short-term pressure does not alter its medium- to long-term allocation value. Backed by geopolitical turbulence, central bank gold buying, and the need for asset diversification, the outlook for gold remains positive.
Demand from a major Asian economy underpins gold, with institutional allocation becoming a dominant force. James Steel, HSBC's chief precious metals analyst, stated that although gold prices have declined amid fluctuating geopolitical conditions, actual gold demand remains strong. Support from the market in a major Asian economy is particularly notable, with premiums for gold traded both on and off the exchange in that country holding around $20 per ounce, reflecting robust domestic buying interest. The primary drivers have shifted from traditional jewelry and small-scale investments towards large-scale institutional gold bar allocations.
This change stems from regulatory adjustments in that major Asian economy and India, where leading domestic insurance institutions and Indian asset management firms have been permitted to increase their gold reserves. Concurrently, the central bank of that major Asian economy added 8.1 tons of gold to its reserves last month, with continued central bank purchases further solidifying underlying market support.
Earlier gains were overheated; crowded long positions triggered a rational correction. Regarding the price movement where gold surged to $5,400 per ounce in late January and then retreated, Steel analyzed that the previous rally was somewhat overheated, with a significant influx of capital from long-term观望 funds and even investors who had never previously engaged with gold entering the market集中. Looking at U.S. Commodity Futures Trading Commission positioning data, the market was overly crowded with long positions at that time, inherently creating a need for a technical correction.
Some market views question why gold prices have fallen instead of rising amid geopolitical conflict, suggesting its safe-haven属性 is failing. Steel disagrees with this perspective. He stated that surging oil prices have boosted inflation expectations, leading to simultaneous strength in U.S. Treasury yields and the U.S. dollar, while equity markets face downward pressure. The market urgently needs to回收 liquidity. Investors selling gold represents cashing in on their safe-haven insurance policy, not a loss of gold's safe-haven function.
The gold-oil correlation has been completely rewritten; now entering an era of negative correlation. Discussing the evolution of the relationship between gold and oil prices, Steel noted that in the 1970s and 1980s, they showed a clear positive correlation, with oil price movements同步 driving gold prices in the same direction. After entering the 1990s, oil's weight in the global economy declined, and the gold-oil联动 gradually weakened. The current correlation coefficient is only 0.15, often turning negative. The market is currently in a phase of negative correlation operation, and the traditional logic of moving in tandem no longer applies.
Regarding its role in asset allocation, he views gold as a high-quality alternative hard asset, combining稀缺 physical properties with high liquidity, exhibiting极低 correlation with tech giant assets over the long term. Compared to physical assets like farmland that are difficult to liquidate quickly, gold can be traded flexibly at any time, which is促使 more asset management institutions to include gold in their investment portfolios for the first time.
HSBC maintains a medium- to long-term bullish stance; short-term headwinds are temporary. On April 2, HSBC commodity strategists Willem Sels and Lucia Ku stated that cross-asset correlations have significantly increased recently, making gold's portfolio diversification value more prominent. Despite its短期 weaker performance, the institution maintains an "overweight" rating for the next six months and adheres to a medium- to long-term bullish outlook.
The analysts noted that inflation disturbances are加剧 interest rate volatility, with monetary policy expectations持续 being repriced. Policymakers are likely to maintain stable interest rates for a period before potentially easing. In terms of investment,收益 can be sought through high-quality credit bonds and emerging market local currency bonds, while allocating gold to hedge portfolio risks. Against the backdrop of ongoing geopolitical uncertainty and continued central bank gold purchases, short-term corrections in gold prices do not undermine the foundation for long-term appreciation.
On March 30, HSBC asset management analysts previously pointed out that by 2026, gold price movements have moved beyond the traditional safe-haven framework, exhibiting behavior more similar to risk assets. During periods of geopolitical tension and U.S. dollar strength, gold faced selling pressure, declining 15% year-to-date in March. A stronger U.S. dollar raises holding costs, and hawkish interest rate expectations weigh on the valuation of non-yielding assets. The positioning structure leaned towards retail and leveraged funds, which are prone to集中 exiting during market波动.
In summary, gold's decline amid the Iran conflict is not a failure of its safe-haven status but the result of combined factors: liquidity回收, previously crowded long positions, and the重构 gold-oil correlation. Institutional physical demand from a major Asian economy and central bank purchases form a solid foundation. As a highly liquid hard asset, demand for gold in diversified asset allocation continues to rise. Although it may exhibit risk asset characteristics with increased volatility in the short term by 2026, supported by de-dollarization, geopolitical避险, and portfolio diversification needs, the medium- to long-term investment thesis for gold remains solid. Short-term adjustments are merely a phase of consolidation.
As of 11:16 Beijing time on May 15, spot gold was trading at $4,616.85 per ounce.
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