Hong Kong Stocks "Says" | Why Has Gold Suddenly Lost Its Shine?

Ask AI · Why the Fed’s Delayed Rate Cuts Are Weighing on Gold’s Appeal

By every day’s economic news reporter: Zeng Zijian Edited by every day’s economic news: Yuan Dong

Recently, gold price movements have been troubling many investors.

On Wednesday, the international gold price fell by 3%, and on Thursday it dropped by nearly 5%. Today, during trading hours, international gold prices have rebounded somewhat, but for those holding gold, it still feels like an uphill battle. Gold’s prior peak was 5,626 USD, and it has now slipped to around 4,700 USD; the decline in this phase has already reached 16%.

Looking at Hong Kong-listed gold mining stocks, companies such as Zijin Mining and Zhaojin Mining have shown clearly higher sensitivity than the gold price itself. Meanwhile, the leading gold retail stock Laopujin (Lao Pu Gold) has already pulled back by more than 30% from its earlier high.

Why, with geopolitical tensions growing increasingly tight, has gold—used for safe-haven purposes—suddenly lost its luster?

In my view, this gold bull market began in 2024. The underlying logic behind the rally is not due to geopolitical conflict, but rather broad-based monetary easing worldwide. So, what ultimately matters for supporting gold prices rising is still the Federal Reserve. However, this Wednesday the Fed kept interest rates unchanged, and Powell also said that “the stance in support of rate cuts has clearly shifted toward becoming more constrained” due to inflation risks. This implies that this year the Fed will slow the pace of rate cuts, and the next rate cut may have to wait until the second half of the year, or even the fourth quarter.

The Fed’s decision to hold off on rate cuts means high interest rates will remain. Gold, being a non-yielding asset, will naturally be pressured as a result. For investors, they may choose to rotate into interest-bearing assets (such as bonds), and gold demand will inevitably weaken.

One point that may be confusing is this: amid ongoing Middle East turmoil, why has gold—the classic safe-haven asset—been falling in price instead? Actually, it’s not hard to understand. When conflict in the Middle East breaks out, gold prices are already at historical highs, facing downside risk, which means gold cannot play a sufficiently strong safe-haven role. In contrast, the U.S. dollar has become the safe-haven asset. Recently, the U.S. Dollar Index has been far stronger than gold, which may also reflect asset shuffling by investors in the Middle East. One more point: the tense situation in the Middle East directly drives up oil prices. That clearly tends to push U.S. inflation higher, thereby delaying the Fed’s rate-cut moves.

So, gold’s current situation is indeed rather awkward. Neither the Fed’s latest statements nor the Middle East situation supports gold prices rising. And investors who have already reaped plenty of profits from earlier gold positions have also made ample gains and are looking for opportunities to lock in those profits. Personally, I feel that in the short term it may be hard for gold prices to see a strong rebound.

As for gold stocks, the core focus is still on gold mining companies. As mentioned earlier, Zijin Mining is expected to release its 2025 annual report. Its performance will most likely exceed expectations, but performance only represents the past, while stock price movements represent the future. Take it one step at a time.

Disclaimer: The content and data in this article are for reference only and do not constitute investment advice. Please verify before using. Investing at your own risk.

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