During the Middle East conflict, a sharp 12% plunge! Standard Chartered: The gold price crash is a "fake fall," and new records will be broken in the future.

```

Recently, gold prices have plunged sharply, again casting doubt on its status as a safe haven asset. However, Standard Chartered Bank believes the downward trend does not change the long-term bullish logic for gold.

On Wednesday, Suki Cooper, Global Head of Commodity Research at Standard Chartered Bank, pointed out in a Financial Times column that the short-term pressure on gold prices comes from surging liquidity demands and cooling expectations for Fed rate cuts, rather than a fundamental shake-up of gold’s safe haven status. She expects gold prices to resume their upward trend in the coming months and challenge historic highs again.

Since the outbreak of the Middle East conflict, gold prices have fallen about 12% in total, a trend contrary to the market’s traditional view of gold as a “safe harbor.”

Suki Cooper stated that gold prices have quickly shifted from an overbought range in January to an oversold state, with technical room for recovery. Meanwhile, gold has yet to fully price in recession risks and stagflation concerns. Multiple structural support factors remain intact, providing a foundation for future rebounds.

Liquidity pressure dominates short-term trend, history suggests corrections are limited

Suki Cooper pointed out that during market turmoil, investors often rotate between different asset classes. Stock market declines trigger margin calls, and gold is one of the rare assets that can provide liquidity without causing losses. This mechanism explains the abnormal drop in gold prices at the onset of crises.

Historically, this liquidity-driven demand usually suppresses gold prices for four to six weeks after a crisis event. Once liquidity pressures ease, investors rebuild gold positions. If a crisis lasts longer, the recovery period extends accordingly—during the global financial crisis, it took gold more than four months to recover lost ground.

The greater drop in gold prices this round compared to previous Middle East geopolitical crises is closely related to the record highs posted in January. Suki Cooper noted that gold hit record levels in January, as did exchange-traded products (ETPs) tracking gold; robust investor demand made gold the preferred asset to sell during market turmoil.

From a technical viewpoint, the deviation of spot gold from its 50-day moving average reached the highest level since 1999 in January; after the conflict erupted, gold prices fell below the 50-day moving average, with deviations at their largest since 2013. Gold completed a switch from extremely overbought to extremely oversold within just a few months.

Rate cut expectations fade, combined with ETP redemptions—near-term pressure persists

Suki Cooper said gold's current short-term trend follows US interest rate expectations and policy uncertainty. Historically, rising rate hike expectations tend to suppress gold prices, since gold yields no dividends or interest, and rising rates increase its opportunity cost. This relationship temporarily broke down at end-2022 as central banks worldwide bought gold aggressively, but it has re-emerged recently with cooling expectations for Fed rate cuts this year.

ETP fund flows are another notable indicator. Suki Cooper pointed out that ETP investors are more sensitive to real yield expectations than structural drivers. March’s net ETP redemptions may be the largest since September 2022, indicating market demand for gold is shifting from structural or safe-haven driven to being dominated by short-term sentiment. However, redemption speed is starting to slow, suggesting earlier overcrowded long positions may have largely cleared out.

At the central bank level, the market is closely watching whether central banks will sell the gold reserves accumulated in recent years. Data shows net gold purchases by central banks declined from over 1,000 tonnes to 863 tonnes last year, but the dollar value set a new record high.

Recession and stagflation risks not yet priced in, structural support remains

Despite short-term pressures, Suki Cooper believes there are still ample reasons supporting higher gold prices. She pointed out that gold prices have not yet reflected recession risks—historical data shows gold rises about 15% on average during economic downturns, whereas commodities with stronger industrial attributes tend to suffer due to production declines.

Meanwhile, gold prices have not fully factored in stagflation concerns. Even if the Middle East conflict ended tomorrow, oil prices would likely remain high for a prolonged period, pushing up inflation expectations. As a store of value, gold tends to perform strongly in environments of unexpectedly high and persistent inflation.

On a broader scale, multiple structural drivers remain as support: concerns over high US and global debt, pressure from fiat currency depreciation, uncertainty surrounding tariffs and trade policy, and ongoing geopolitical risks.

From a technical perspective, Suki Cooper noted that gold’s 200-day moving average has not been effectively breached since October 2023, serving as an important price support floor. In summary, she said gold’s short-term path is unlikely to be smooth; current liquidity pressure may persist for a while, but she expects gold prices will resume their upward trajectory in the coming months.

Risk Warning and DisclaimerThe market carries risks; investing needs caution. This article does not constitute personal investment advice and does not take individual users’ special investment goals, financial situation, or needs into account. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their own circumstances. Investments made based on this are at your own risk. ```