Domestic gold prices fell below the 1,000 yuan per gram mark on March 23. By the afternoon close, the main gold futures contract on the Shanghai Futures Exchange dropped 8.62% to 940 yuan per gram. Internationally, spot gold fell 10.52% last week, marking its largest weekly decline since March 1983.

Despite the sharp drop in gold prices, a contrasting wave of enthusiasm was observed at the gold jewelry counters in Shenzhen's Shuibei district.

A visit to the Shuibei gold market on the morning of March 23 revealed a steady stream of consumers at jewelry counters, with some merchants simultaneously conducting live sales broadcasts. Overall customer traffic saw a noticeable increase compared to previous periods. One consumer commented, "The price drop is a good opportunity to buy the 'Five Golds' for weddings. If it falls a bit more, the cost of buying jewelry will be even lower."

A gold material supplier mentioned that many investors have been buying gold recently. "However, judging by recent oil prices, we estimate gold prices still have some room to fall."

International gold prices have declined significantly for four consecutive trading days, with domestic prices following suit. The main continuous gold contract on the Shanghai Futures Exchange fell 8.62% on the day, equivalent to a drop of 88.66 yuan per gram compared to its opening price.

The falling prices are also influencing consumer sentiment. Despite it being a Monday, foot traffic at the jewelry counters in Shuibei was substantial, and noticeably higher than during the previous peak when prices were around 1,200 yuan. Some consumers, concerned about buying at a high point, were asking counter staff about the future direction of gold prices, questioning, "Do you think it will fall further?"

In terms of product categories, traditional items like gold bracelets, necklaces, and rings remained popular choices, while products featuring 5G gold and ancient-style craftsmanship were also in favor. One merchant noted, "We also have many customers coming in to exchange gold. Those who hold gold bars can trade them in for jewelry by paying the price difference."

Another merchant suggested that for smaller items, consumers need not worry excessively about price fluctuations. However, for purchases over 50 or 100 grams, comprehensive consideration is indeed necessary.

Earlier this year, international spot gold had surged by nearly 30% at its peak. But with recent declines, it has now completely erased all its year-to-date gains. Unlike jewelry buyers, investors appear more hesitant.

Some investors reported having already taken profits when prices were high and are now considering re-entering the market to buy physical gold. Others have begun buying the dip. "Recently, with the price drop, more people are buying. One customer bought 2 kilograms of gold in a single transaction," a merchant stated.

A business specializing in gold bar recycling disclosed that many clients who bought at high prices are now averaging down their costs by purchasing more. "For example, clients who bought in at over 1,200 yuan are now buying more to lower their average cost. If funds permit, we don't recommend selling in a hurry." The merchant also pointed out that some clients with acquisition costs around 300 yuan are choosing to cash out at current levels.

Amid the ongoing high volatility, some investors expressed uncertainty. "No one knows where the bottom is this time. I want to buy more but fear catching a falling knife; if I don't, I might miss the opportunity. The key issue is that I don't have much capital left," one investor admitted.

Commenting on the recent decline in gold prices, Yuan Zheng, a precious metals researcher at Galaxy Futures, attributed the drop primarily to two factors. First, Middle East tensions have driven up oil prices, fueling expectations of interest rate hikes. Concurrently, the surge in oil prices has a greater impact on Japan and Europe—economies linked to the US dollar's valuation—increasing their demand for dollars to secure oil resources, thereby strengthening the US dollar index and putting pressure on precious metals. Second, the market had become excessively crowded with long positions in precious metals, and a liquidity shortage triggered a panic-driven sell-off and market stampede.

Despite ongoing global instability, the traditional safe-haven asset, gold, has fallen instead of rising.

Yuan Zheng explained that the long-term bullish case for gold has gradually shifted from its traditional "safe-haven" attribute towards a deeper "monetary credit restructuring" narrative, primarily reflected in three aspects.

First, de-dollarization and central bank gold purchases provide the strongest medium to long-term support. As geopolitical risks become常态化, non-US central banks (particularly in emerging markets) continue to increase gold reserves to avoid sanction risks and enhance financial security. Although the pace of purchases has recently slowed, this strategic trend is far from over.

Second, the weakening credit of the US dollar: Persistently high US fiscal deficits, coupled with a weakening technological pillar—one of the "Three Pillars of the Dollar"—are eroding the dollar's credit system. Gold, as an asset not bound by any single sovereign credit, is being revalued.

Third, stagflation hedging and systemic risk: In a global economy facing potential "high inflation, low growth" risks, gold's anti-inflation properties will be fully utilized. Additionally, gold serves as a hedge against risks of "international order collapse" and "sovereign credit currency risk."

"Although gold has experienced a significant correction recently, the fundamental long-term bullish logic hasn't changed significantly. This is more about a shift in short-term trading focus, with the long-term narrative temporarily suppressed," Yuan Zheng stated.

Zhou Puhan, an analyst at Huafu Securities, noted that currently, strong oil prices are boosting inflation expectations, which transmits to liquidity conditions and risk appetite. During this period of entrenched conflict, the US dollar and cash might better satisfy safe-haven需求. Furthermore, market expectations for Federal Reserve rate cuts have weakened this week, with US February PPI exceeding forecasts and Fed Chair Powell adopting a relatively hawkish stance, even reviving expectations for rate hikes. In an environment of changing real interest rate expectations and tightening liquidity, gold faces significant pressure.

"After the liquidity shock, the long-term supportive logic for gold still holds. On one hand, central bank gold buying provides solid support for prices. On the other hand, if conflicts persist and intensify, they will exacerbate US military spending and fiscal burdens, further straining US dollar credit and accelerating de-dollarization," Zhou Puhan believes.