Big plunge! Spot gold drops below the $4,600 mark

Question AI · How did the U.S. PPI data exceeding expectations trigger a gold sell-off?

On March 19, the international gold market experienced a significant decline. Following a plunge the previous night, spot gold continued to undergo deep adjustments during the day, briefly falling below the $4600/oz mark in the evening, with domestic gold jewelry prices also sharply retreating.

As of the time of this report, London gold was quoted at $4532.564/oz, down 5.84% for the day, with a low of $4502.01/oz during trading, just a step away from falling below $4500/oz.

The futures market also weakened, with COMEX gold futures dropping 6.34% during the day, reported at $4586/oz, with an intraday low of $4533.1/oz.

Meanwhile, domestic gold jewelry brands significantly lowered their prices for pure gold items, with several brands’ gold jewelry prices retreating to around 1500 yuan per gram. Among them, Chow Sang Sang quoted 1492 yuan per gram, a decrease of 55 yuan per gram from the previous day; Lao Miao Gold quoted 1507 yuan per gram, down 43 yuan per gram; and Chow Tai Fook quoted 1503 yuan per gram, down 48 yuan per gram.

Multiple bearish factors released

Why did gold prices suddenly plummet?

Interviewees generally believe that the rapid drop in gold prices is primarily due to U.S. inflation data exceeding expectations and the Federal Reserve’s hawkish stance, coupled with liquidity and technical adjustments applying pressure.

Wang Weimang, an investment manager at Zhonghui Futures Asset Management, pointed out that the U.S. February PPI data significantly exceeded market expectations, directly devastating interest rate cut expectations: February PPI rose 3.4% year-on-year, higher than the expected 3.0% and the previous value of 2.9%; it increased 0.7% month-on-month, marking the largest single-month increase since July 2025, far surpassing the expected 0.3%. Meanwhile, the Federal Reserve kept interest rates unchanged, with the latest forecast indicating that the number of rate cuts this year may be reduced to once, clearly leaning hawkish.

Wang Weimang further stated that gold, as a non-yielding asset, sees reduced expectations for rate cuts directly raising the opportunity cost of holding it. Coupled with a strengthening dollar index, investors were forced to raise liquidity under margin calls and portfolio rebalancing pressure, with gold, as a highly liquid asset, bearing the brunt, leading to significant outflows in global gold ETF holdings. At the same time, the previous increase in gold prices was substantial, and bearish news triggered concentrated profit-taking from short-term bulls, potentially even triggering algorithmic selling that amplified market volatility, resulting in a waterfall-like decline.

Xiao Jingyu, a precious metals researcher at Xinhuhua Futures, also believes that the catalyst for this round of decline is the U.S. PPI data in February exceeding expectations, with rising energy prices being an important booster. The core issue lies in the market’s concern that a rebound in inflation could trigger liquidity tightening. Currently, the February data does not yet account for the impact of rising energy prices due to the U.S.-Iran conflict, intensifying market worries about future U.S. prices. Meanwhile, the Federal Reserve, during its interest rate meeting early this morning, maintained its position as expected, and the dot plot indicates one rate cut expectation this year, slightly better than the market’s pessimistic predictions. However, the overall market interpretation leans hawkish, leading to an accelerated drop in gold prices during the day as panic emotions were concentratedly released.

Long-term outlook remains positive

Looking ahead, Wang Weimang believes that under the current macro environment, gold prices may continue to be under pressure in the short term, with the possibility of further declines. The main suppressing factors are the concerns about inflation making it difficult for the Federal Reserve to quickly shift to easing, and the temporary strengthening of the dollar diverting some safe-haven funds. From a technical perspective, after gold prices lost an important level, the downward seeking bottom pattern may not yet be complete. However, looking at a longer timeframe, the fundamental factors supporting the gold bull market remain unchanged, and the long-term upward trend is still in place.

Xiao Jingyu stated that the key variables for short-term gold trends remain the duration and intensity of the Middle East situation, which is also the biggest uncertainty in current judgments. Currently, gold prices have not stabilized and are on the left side of the trend. However, in the medium to long term, structural factors such as rising global sovereign credit risks, geopolitical polarization, and the deepening of de-dollarization processes have not changed. The U.S.-Iran conflict further exacerbates global uncertainty, all providing long-term support for gold.

In terms of investment strategy, Wang Weimang indicated that given the absence of clear signs of a bottoming in gold prices in the short term, short-term traders may wait for price stabilization or engage in range trading, but must strictly control positions and risks. For long-term investors, the current price pullback may be seen as a good opportunity for medium to long-term bullish positioning. He suggests that investors incorporate gold as part of a diversified investment portfolio, buying in batches and at different times to seek long-term layout opportunities amidst volatility.

In the face of a highly uncertain and volatile market environment, Xiao Jingyu advises that investors with conditions consider buying straddle options while holding both call and put options to capture directional breakthroughs; conservative investors may initiate a gold dollar-cost averaging plan to smooth out short-term fluctuations and seize long-term allocation value.

Reporter: Lu Yiwen

Text Editor: Chen Si