Gold prices continue to plummet! Some are "rushing to bottom-fish for gold" - is now a good time to get on board?

Why do investors hold both bottom-fishing and waiting strategies amid gold price fluctuations?

Recently, gold prices have been experiencing wild swings reminiscent of a “monkey market.” After several days of decline, investor choices have become polarized: many rush to buy the dip and profit; others, though tempted, remain cautious and choose to observe.

On March 20, after a sharp drop the night before, spot gold prices slightly rebounded. As of press time, international spot gold rose to $4,660.09 per ounce, having previously fallen to $4,501.59 per ounce the day before.

Currently, gold price volatility is intensifying. Banks and financial institutions are issuing risk alerts and tightening precious metal investment services.

Is now still a good time to buy? Market analysis suggests that in the short term, geopolitical conflicts and the energy price shocks they trigger are the main drivers of global “safe-haven” trading. This has caused gold to fluctuate repeatedly. Moreover, gold’s recent performance contradicts previous common perceptions because the market’s trading logic has fundamentally shifted from “safe-haven trading” to “inflation-tightening trading.” However, some institutions believe that, in the long run, gold still holds structural value.

Timely Entry vs. Hesitation to Pay: Diverging Investment Choices After Gold Price Drop

“Gold is about to hit $5,500 per ounce. The decline is so rapid.” On the evening of March 19, Li Wei watched the fluctuating international spot gold prices on her phone, noticing the price kept falling and feeling increasingly anxious. Since late last year, she has invested in gold through ETFs and gold accumulation schemes, but the recent price drop has wiped out most of her previous gains.

Should she buy more immediately or wait? Li Wei hesitated: she believed gold prices had already fallen to a relatively low point, but was unsure if they would continue to decline. Ultimately, she bought a small amount to “jump into the market,” thinking, “If it drops again, I’ll buy more then.”

Compared to online purchases, some investors prefer buying physical gold. Several told Shell Finance, “Electronic gold is hard to hold,” and “Physical gold feels more secure.”

“I just bought 100 grams of investment gold bars at 1,045 yuan per gram, but I haven’t paid yet.” On the morning of March 20, the investment gold bar counter at Beijing Caibai Department Store was crowded with buyers. An elderly man with gray hair stared at the “K-line” chart of spot gold prices on his phone for over half an hour. According to store policy, after issuing a receipt, buyers must pay within an hour.

His hesitation was mainly because the daily K-line of spot gold showed only a “bottoming tail,” suggesting it “may still fall further,” which made him delay payment. But with only about 10 minutes left before the receipt expired, he decided to complete the transaction. Spot gold then rose to 1,052 yuan per gram. However, by the evening of March 20, spot gold had fallen again to 1,033.96 yuan per gram.

Meanwhile, several other investors told Shell Finance they preferred to wait for better opportunities, believing gold prices might still decline, so they haven’t yet made a move. Others think gold is already at a high level and that exiting now is the best choice.

On social media, opinions on how to invest in gold are divided: some say “buy now,” others suggest “wait,” and some warn “a bear market is coming.” Some believe current prices are at the bottom and that buying now is the way to “grab the dip”; others think short-term volatility persists and that waiting until prices reach 1,000 or even 800 yuan per gram is wiser; still, some predict an “M-shaped” future trend, implying the gold bull market may be over.

Institutions Cool Down “Gold Investment Fever”; Multiple Banks Limit Physical Gold Withdrawals Due to Accumulation Gold Restrictions

“Our bank branch can’t currently withdraw physical gold from the gold accumulation account.” On March 20, a staff member at a state-owned bank in Beijing told Shell Finance that due to the ongoing gold investment craze, physical gold withdrawals from accumulation accounts have been unavailable for some time.

Another staff member from a different state-owned bank also said that purchasing and exchanging accumulation gold for physical gold has become relatively difficult. Since the bank has imposed purchase limits on accumulation gold, they advised trying again the next morning.

Shell Finance learned that due to recent sharp fluctuations in gold and silver prices, banks are gradually tightening their precious metal trading services and issuing risk warnings. For example, China Construction Bank and Industrial and Commercial Bank of China are managing limits dynamically; once quotas are exhausted, new purchases are blocked for the day. Many banks are also closing their agency services for individual precious metal trading at the Shanghai Gold Exchange, and several are urging clients to terminate agency agreements.

Additionally, banks have repeatedly warned investors about risks in the precious metals market since last year. On March 20, ICBC issued a notice emphasizing that, amid complex global macroeconomic and geopolitical developments, domestic and international precious metal markets are experiencing increased volatility. To protect investors’ assets and ensure prudent investment, they advise maintaining a calm and rational mindset, thoroughly assessing risk tolerance, and avoiding impulsive buying or selling driven by short-term market emotions.

ICBC also suggested that from a long-term asset allocation perspective, investors should follow principles of “controlling overall exposure, entering in stages, and diversifying,” extending investment horizons to smooth out cyclical risks and build a more resilient portfolio.

Investment Advice: Short-term Caution, Avoiding Bottom-Fishing Risks

With gold prices “bouncing up and down,” is now a good time for investors to buy in? Industry experts generally believe that gold will trend “under short-term pressure but with a positive outlook in the medium to long term.”

Dong Ximiao, chief economist at Zhaolian, noted that gold’s recent performance contradicts previous perceptions mainly because the market’s trading logic has fundamentally shifted from “safe-haven trading” to “inflation-tightening trading.” Historically, geopolitical conflicts triggered market concerns about “uncertainty,” leading funds to flow into gold for safety. But this time, after the conflict erupted, the market first focused on potential disruptions to oil supply, causing oil prices to surge. The primary concern shifted from “war risk” to “inflation risk caused by rising oil prices.” Meanwhile, expectations of monetary policy reversals also pressured gold prices.

“Besides oil prices, several other factors may influence gold,” Dong explained. First, the Federal Reserve’s policy signals—this is currently a direct influence. If market expectations for rate hikes intensify, gold will face significant selling pressure. Second, key economic data, especially US inflation figures and employment reports. Third, the US dollar index and Treasury yields, which usually have a strong negative correlation with gold.

Yao Yuan, senior investment strategist at Orient Securities Asset Management’s Asia Research Institute, believes that while short-term liquidity squeezes in gold may occur, the long-term investment logic remains unchanged. Investors should distinguish between short-term fluctuations and long-term prospects.

Yao pointed out that in the short term, geopolitical conflicts and energy price shocks are the main drivers of global “safe-haven” trading. In such an environment, investors tend to cash out of risk assets. However, over longer periods, gold’s proven ability to hedge geopolitical, macroeconomic, and policy risks makes it a valuable asset for allocation.

Additionally, Qu Rui, senior vice president of research at Orient Securities, advised that investors should remain cautious in the short term, avoiding bottom-fishing risks and waiting for support levels to be confirmed. For medium to long-term positioning, they can consider gradual accumulation, with gold constituting about 5-10% of their portfolio as a hedge. Key factors to watch include the Fed’s rate cut prospects and Middle East developments, while remaining alert to risks like inflation exceeding expectations and escalating geopolitical conflicts.