Wen Chengkai: Gold's safe-haven attributes have failed. Why does it not rise but instead fall? An analysis of the downward trend

Core Phenomenon Inquiry: Why is gold “falling instead of rising” amid geopolitical fluctuations?

On March 27, the current geopolitical situation continues to shake, and under normal circumstances, safe-haven assets should rise sharply, but gold is showing characteristics of consolidation and periodic correction, which has puzzled many investors and has once again triggered a deep examination of the effectiveness of gold’s safe-haven properties in the market.

The conclusion of UBS’s CIO survey points directly to the core: Although gold has long been regarded as a safe-haven asset, its performance at the onset of geopolitical conflicts is not stable. Historical experience has long proven that gold’s trends are by no means solely driven by geopolitical risks, but are jointly dominated by three core factors: the inflation environment, monetary policy expectations, and global capital flows. Simple comparisons to historical events can easily lead to judgment errors.

Current Landscape: Short-term multiple pressures, long-term support remains solid.

(1) Short-term pressure: Three factors firmly lock in gold prices.

Monetary policy pressure: Rising energy prices elevate inflation expectations, forcing major global central banks to maintain a tight monetary policy, significantly increasing the holding costs of non-interest-bearing assets like gold, causing funds to flow more towards high-yielding assets such as the US dollar and US Treasuries, directly suppressing gold. Capital flow pressure: The US dollar index remains relatively strong, combined with investment funds temporarily flowing out of the precious metals market, further weakening gold’s upward momentum. Sentiment return pressure: Market sensitivity to geopolitical situations gradually declines, with gold transitioning from “emotion-driven” to “fundamentally priced,” lacking strong emotional support in the short term.

(2) Long-term logic: The trend remains unchanged, and the correction is merely a phase adjustment.

UBS clearly points out: The current correction in gold is by no means a trend reversal, but a phase adjustment within the long-term upward trend. As high energy prices weigh on the global economy, expectations of slowing growth are rising, and there is clear room for adjustment in monetary policy going forward. Once interest rate expectations peak or even reverse, the allocation value of gold will be highlighted again, which is the core foundation for gold’s long-term strength.

Market Signals: Volatility differentiation, sentiment returns to rationality.

From the perspective of market sentiment and structure, gold’s performance shows a distinct differentiation: Spot market: Price fluctuations have narrowed, maintaining a range-bound consolidation on a daily basis, indicating that the short-term direction remains unclear; Volatility side: The gold volatility index remains relatively high, indicating that the potential impact of geopolitical risks has not been fully released, and there is still a possibility of extreme volatility in the market. This differentiation precisely confirms the market’s shift: gradually returning from blindly following emotional drives to a rational pricing logic based on interest rates and economic fundamentals, with the short-term fluctuations being merely transitional.

Gold’s range-bound consolidation and pullbacks present buying opportunities.

Gold maintains a range-bound consolidation pattern between $4,300 and $4,700: Short-term resistance: $4,550-$4,600; Short-term support: $4,400-$4,350; Breakout logic: An effective breakout above $4,600 could open up rebound space; A drop below $4,300 could further test mid-term lows. Overall, the technical outlook is primarily focused on repair, and trend opportunities need to be supported by fundamental data.

Combining the current market situation with core logic, Wen Chengkai provides a clear conclusion:

(1) Short-term judgment: High probability of stabilization around $4,350. Gold has currently pulled back to around $4,350, and I believe that the short-term downside space is basically limited, and it is not advisable to short in the short term. This round of trend is more likely a secondary pullback to test the bottom rather than a direct break below the mid-term low of $4,100. In the short term, the possibility of breaking below $4,100 again is very low.

(2) Core opportunity: Secondary pullback, layout for the main upward wave. A secondary pullback is by no means a bad thing; instead, it is an opportunity to enter. In the rebound market starting from $4,100, the short-term fluctuations are just a buildup of strength, and the real main upward wave is still to come, with the mid-term target of $4,900-$5,000 remaining unchanged. Operational focus: Signs of stabilization in the $4,350 region, once confirmed, will be a key opportunity for bulls to enter, as too low a point is unlikely to be presented.

(3) Annual operational iron rule: Maintain rhythm in a volatile market, do not be greedy; this year, the gold market is primarily characterized by volatility, rather than a one-sided trend, and operations must adhere to rhythm: For accumulated gold and silver: Investors with high positions must exit when this round of rebound approaches $5,000, waiting for the next pullback to re-enter; Short-term investors: Abandon chasing highs and cutting lows, instead focusing on high selling and low buying within the range to capture certain returns.

Comprehensive Outlook: Short-term under pressure, medium to long-term still has upward potential.

The current gold market is in a typical stage of “short-term pressure, long-term support”: Short-term: Geopolitical situations have not directly driven gold prices, and the suppression from macroeconomic and monetary policy remains, with gold prices likely to maintain a range-bound consolidation, primarily building a bottom through fluctuations; Medium to long-term: The trend of global economic slowdown is clear, policy expectations are expected to turn, coupled with the long-term impact of geopolitical risks, gold still possesses the upward potential to challenge above $5,000.