Gold's recent sharp decline is not due to a "failure of safe-haven assets," but rather a change in the underlying pricing logic.

Recently, many people’s first reaction to the sharp decline in gold prices is: isn’t gold supposed to be bought during chaotic times? Why does gold fall so sharply when geopolitical risks escalate? I believe this is precisely the area worth deep analysis in the current market. Gold hasn’t lost its value; rather, its pricing power has shifted from “safe-haven premium” in the short term to “reflation expectations, a strong dollar, and rising real interest rates.” At the end of January, spot gold once surged to around $5,594, and on March 19, it dipped to a low of about $4,612. Such a retracement is obviously intense, but fundamentally, it resembles a high-position asset undergoing a concentrated revaluation due to a macro narrative shift, rather than a collapse of long-term logic.

Many people have been used to thinking of gold simply as an asset that rises when risk increases, but the market in 2026 has proven that this understanding is too crude. When geopolitical conflicts mainly cause panic, gold benefits; but if such conflicts further push up oil prices, inflation expectations, and the dollar, gold may not rise—in fact, it could even fall. Because gold is essentially a non-yielding asset, when markets start to worry about energy prices rising again, delayed Federal Reserve rate cuts, and high real interest rates, the cost of holding gold increases, and its valuation gets compressed. In other words, the current pressure on gold isn’t because the market no longer needs safe-haven assets, but because the market believes that the combined impact of “high oil prices + high interest rates” is more damaging in the short term than “safe-haven buying.”

Therefore, when judging gold’s trend this year, we can’t just consider the single dimension of “will there be a war?” Instead, we must focus on three main factors that truly determine the direction: first, will oil prices stay high? Second, will the Federal Reserve keep interest rates elevated for longer? Third, will the dollar continue to absorb global safe-haven capital? As long as these three factors continue to develop unfavorably for gold, even if gold rebounds, it’s more likely to be a short-term oversold correction rather than a return to the kind of relentless rally seen earlier this year.

But this doesn’t mean gold will enter a bear market this year. I lean more toward the view that 2026 will be a transition year for gold—from an “accelerating rally” to a “high-level revaluation.” In other words, the environment of a one-way big bull run has been disrupted, but the fundamental logic supporting long-term gold remains intact. Central banks worldwide are still buying gold, ETF allocations haven’t declined, and the trend toward global reserve diversification persists. Gold’s greatest advantage is that it’s not driven solely by trading sentiment; behind it are official reserves, long-term strategic holdings, and global risk hedging needs. Therefore, even if gold falls sharply in the short term, it’s unlikely to become a long-term deep bear asset. Instead, it’s more like a rebalancing at high levels, setting the stage to find a new upward rhythm.

Looking at the overall rhythm for the year, I believe the first half will likely be quite challenging for gold. The reason is simple: the market is still trading the logic of “rising oil prices fueling inflation, the Fed maintaining high rates, and the dollar remaining strong.” During this phase, gold will likely experience high volatility and oscillations. Its trend may not be bad, but it probably won’t be as clean and decisive as last year’s rapid, one-sided rally. The key turning point is probably not in the risk event itself but in when the repercussions of these risks on economic growth start to show. Once high oil prices and high interest rates begin to noticeably suppress US growth, employment, and consumption, the market’s valuation logic will shift from “reflation” back to “growth slowdown.” At that point, the medium-term outlook for gold will improve again.

This is also why I am more optimistic about gold in the second half of the year. In the first half, the market fears a resurgence of inflation; in the second half, if economic slowdown pressures gradually materialize, the market will reprice rate cut expectations, which will again support gold from the interest rate side. Simply put, the most likely path for gold this year isn’t a steady rise nor a continuous fall, but rather “initial pressure, then stabilization, followed by recovery.” The rhythm will probably be weaker oscillations in the first half, gradually improving in the second half, resulting in a year characterized by high volatility and wide ranges, rather than last year’s accelerated, one-sided upward trend.

If I must give a judgment closer to an institutional framework, I would divide this year’s gold outlook into three scenarios. In the baseline scenario, oil prices stay high but don’t spiral out of control; the Fed remains hawkish but doesn’t significantly tighten further; the dollar stays strong but doesn’t appreciate to extremes. Under this scenario, gold is more likely to fluctuate within a broad range, with a lower midpoint than the extreme highs at the start of the year, but still ending the year higher than current levels. In an optimistic scenario, oil prices fall, growth slows, and the Fed signals a clearer easing stance, which could push gold to retest previous highs or even approach $6,000. In a pessimistic scenario, if oil prices remain high, inflation reemerges, and the Fed refuses to loosen policy throughout the year, with the dollar continuing to absorb safe-haven flows, gold could face deeper valuation compression.

But at this moment, I don’t support the simple view that gold is “done for.” On the contrary, I believe what we need to be more alert to is another misjudgment: mistaking a short-term plunge for a long-term trend reversal. The recent rise in gold over the past year was never driven solely by geopolitical risks but by deeper global asset reallocation logic. As long as central banks worldwide continue to increase their gold reserves, as long as institutional funds still view gold as a long-term hedge, and as long as there’s demand for asset diversification outside the dollar credit system, the fundamental macro logic supporting gold remains intact. What changes is the rhythm, not the direction; what shifts is the valuation approach, not the asset’s core status.

Therefore, my core judgment for gold in 2026 can be summarized in one sentence: short-term neutral to cautious, medium-term oscillating to bullish, with a high probability of a “pressure in the first half, recovery in the second half” structure. Gold hasn’t lost its value; it’s undergoing a rebalancing from emotional premiums back to macro-based pricing. For those focused on medium-term allocation, this year’s key isn’t chasing every news trigger but monitoring three variables: oil prices, the Fed, and the dollar. As soon as one of these three shows a clear directional change, the next intermediate wave for gold will begin anew.