Bosera Fund's Wang Xiang: Gold declines for the third consecutive week, short-term driven by market sentiment and speculative battles

Under the dual influence of a shift in interest rate expectations and increased demand for dollar liquidity, the gold market has declined for the third consecutive week. As technical trends worsen, CTA (Commodity Trading Advisor) trend strategy traders have begun to exit, and outflows from European and American ETFs have accelerated. Domestic investor trading remains relatively stable, with no significant changes in shares.

In terms of market perspective, last week (3.16~3.20), international gold fell by a total of $525.56, a decrease of 10.47%, marking the largest weekly drop since March 1983. Since the outbreak of war earlier this month, gold prices have cumulatively fallen by over 14%, surpassing the peak drawdown of the past three years.

The central banks of the U.S., U.K., and Europe maintained current interest rates unchanged throughout the week but expressed a generally negative outlook on inflation and monetary policy. The Fed’s dot plot shows that as many as seven officials expect no rate cuts this year, while one official even anticipates a possible rate hike next year. Both the Bank of England and the European Central Bank noted that rising global energy prices have begun to be reflected in gasoline prices, emphasizing that the committee is prepared to take action as necessary to ensure CPI inflation returns to the established target. After the hawkish stance from the U.K. and European central banks, gold priced in euros and pounds both fell by over 4% last Thursday, indicating that some capital is shifting from gold to euro and pound assets. This suggests that last week’s decline in gold was not solely due to the weakening of the dollar but was under broader pressure from the repricing of key monetary policies.

Another layer of pressure on the gold market comes from “liquidity squeeze.” As tensions in the Middle East escalate, transportation through the Strait of Hormuz is disrupted, and risks spill over into surrounding regions, some funds have begun to prioritize liquidity and asset safety, leading gold holders to sell physical gold at discounts in local markets. Although this kind of passive selling does not necessarily represent a bearish outlook in the medium to long term, it is enough to amplify price volatility in the short term. As technical trends worsen, CTA trend strategy traders have started to exit en masse, and outflows from European and American ETFs have also accelerated during the week.

The short-term performance of the gold market has been dominated by market sentiment and speculative games, deviating to some extent from the logic of safe-haven hedging and de-globalization. However, for medium to long-term investors, this also means an improvement in cost-effectiveness for allocation.

Regarding market dynamics last week, the Fed’s interest rate outlook lowered expectations for easing. On the 12th, the Fed announced that it would keep the policy rate unchanged in the range of 3.5%-3.75%, in line with general market expectations.

There are no signs of de-escalation in the Middle East situation. Last week, the U.S. and Israel bombed Iran’s South Pars oil and gas field, prompting Iran to retaliate against oil facilities in surrounding countries, further escalating the situation during the week. Reports also indicate that the U.S. is dispatching amphibious landing forces to the Middle East in an effort to seize Iran’s oil and gas stronghold, Khark Island.

(Risk warning: Gold has been experiencing significant volatility recently. Investors in gold funds must fully understand the risks and make prudent decisions based on their own risk tolerance. It is also advisable to continuously monitor global macroeconomic trends, global central bank gold purchases, geopolitical situations, and related developments.)

Risk warning: The information contained in this material does not constitute a service for trading any securities or providing any investment decision advice. This information does not constitute targeted operational guidance for any individual at any time, and investors should evaluate the information in this material, make independent decisions based on their own circumstances, and bear their own risks. We make no express or implied guarantees regarding the accuracy, reliability, timeliness, or completeness of the materials contained herein. The content of this material is based on information available on the date of issuance, and changes may occur subsequently. Unauthorized dissemination or editing of this material for commercial purposes by third-party organizations or individuals is prohibited.

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Editor: Guo Xutong