Safe Haven Asset Properties Failing? Gold Records Largest Weekly Decline Since 2011, Annual Gains Narrow to Around 4%

Tongtong Finance APP learned that amid the ongoing escalation of conflicts in the Middle East, soaring energy prices, and reversing interest rate expectations, the gold market has experienced intense selling. On Friday, international gold prices continued their decline, recording the largest weekly drop since 2011.

By the close on Friday, spot gold fell sharply by 3.43%, to $4,498.31 per ounce, down about 9.5% for the week; spot silver declined even more significantly, dropping 6.89% to $67.801 per ounce, with a weekly decline of over 14%.

The core driver of this gold price decline stems from rapid changes in the macro environment. As conflicts between the US and Iran escalate, energy prices continue to rise, and concerns about a rebound in inflation have significantly increased. Meanwhile, the US dollar and Treasury yields have strengthened simultaneously, reducing the appeal of gold as a non-yielding asset.

Changes in market expectations are particularly crucial. Previously dominant expectations of rate cuts have quickly dissipated, with traders now betting that the Federal Reserve may raise interest rates later this year, with the probability rising to about 50%. Expectations of rising interest rates generally suppress gold prices, which is one of the key reasons for this round of price correction.

Evolving geopolitical risks also have a complex impact on market sentiment. Although the conflict should increase safe-haven demand, markets are more focused on energy supply shocks and their effects on inflation and policy paths. With tensions in the Strait of Hormuz and news of possible US military expansion, investor risk appetite has declined, and funds are flowing into the US dollar and other highly liquid assets.

From a market structure perspective, this decline is also influenced by technical and capital factors. Previously, gold prices approached historical highs, attracting substantial long positions, which created inherent correction pressure. When prices started to fall, many stop-loss orders were triggered, accelerating the sell-off. Additionally, liquidity demands from declines in equities and bonds prompted investors to sell gold to offset losses in other assets.

Furthermore, outflows from ETFs and a slowdown in central bank gold purchases have also dampened market sentiment. Data shows that gold ETF holdings have decreased for three consecutive weeks, with total holdings down by over 60 tons, indicating a clear short-term withdrawal of funds.

Despite the short-term pressure, gold remains on an upward trend for the year, with an approximate gain of 4%. Analysts point out that the current price correction is more of a phase adjustment driven by dramatic macroeconomic changes. Given ongoing inflation risks, expanding fiscal deficits, and geopolitical uncertainties, the long-term case for gold as an asset allocation remains fundamentally unchanged.