Gold has plunged again—where is the gold price headed next?

This Friday, gold plummeted 3.17%, marking its largest single-day drop since gold began its steady rally in August—so, is the small bull run in gold that began in August coming to an end? At the end of January this year, gold suffered a historic crash: the so-called ‘safe-haven’ asset plunged nearly 13% in a single day—the steepest decline of the first half of the year. The trigger may well have been a single statement by U.S. Treasury Secretary Bessent: “We must tell everyone that the U.S. pursues a strong dollar—sit down, take a deep breath, and don’t retaliate.” Quantitative trading models instantly detected this remark—and immediately dumped gold. Why did quantitative models sell gold? The principle is actually quite simple: under normal circumstances, the U.S. dollar and gold exhibit a negative correlation—when the dollar strengthens, gold falls; when the dollar weakens, gold rises. Bessent’s declaration—“the U.S. pursues a strong dollar”—clearly signaled intent to bolster the dollar. If implemented, a stronger dollar would inevitably pressure gold lower. Indeed, most of gold’s declines in the first half of this year closely tracked dollar strength. After the January crash, gold staged a robust rebound, propelled by momentum from prior gains. Just as it neared its all-time high, however, a U.S. military operation abruptly halted the rally. Yes—you guessed it: the Middle East. On February 28, 2026, the U.S. and Israel jointly launched a large-scale military strike against Iran, codenamed “Epic Fury,” during which Iran’s Supreme Leader Ayatollah Khamenei was killed in the opening wave of airstrikes. Logically, such geopolitical conflict should boost gold prices—but instead, gold continued falling sharply. This seemingly anomalous reaction is, in fact, entirely unsurprising. The U.S.-Israeli surprise attack prompted Iran to immediately close the Strait of Hormuz, severing a critical oil shipping route and triggering a sharp spike in oil prices. As the cornerstone of the modern economy: First, oil is a vital energy source—gasoline, diesel, kerosene, etc. Rising oil prices drive up energy costs structurally. Second, oil is also a key industrial raw material, permeating every facet of daily life. When raw material costs rise, broader price pressures follow.

How will gold perform going forward?

Domestic investors must pay special attention to one upcoming event: the National Day holiday. While domestic markets will be closed, international markets remain open. Throughout the holiday, overseas economies will continue releasing key economic data; Federal Reserve officials will deliver public speeches; Middle Eastern tensions could escalate unexpectedly; and oil prices will remain volatile. Should any major overseas news break during the holiday, gold prices are highly likely to gap significantly upon China’s market reopening—amplifying risk. For this reason, institutions advise investors to hold light positions over the holiday and avoid heavy exposure, thereby minimizing the risk of substantial losses triggered by unexpected developments. Looking at the full year, institutions maintain a relatively optimistic long-term outlook: they forecast London gold may test $5,000 per ounce this year, while London silver could reach $90 per ounce. However, this optimistic scenario is conditional—not guaranteed. A crucial caveat: if expectations for a December rate hike remain stubbornly elevated, gold is unlikely to enter a major bull market in Q4. Instead, it will likely trade sideways within a range of $4,200–$4,700 per ounce, with silver ranging between $62–$70 per ounce. In other words, Q4 favors tactical, swing-style trading rather than directional, sustained rallies. Beyond market logic, let’s address common pitfalls for ordinary retail investors entering the gold market. Many fail to distinguish among vastly different gold investment vehicles now available: spot gold, gold futures, gold ETFs, physical gold bars, and gold jewelry. Jewelry carries steep premiums; even if global gold prices rise, resale value suffers severe discounts—making profit via jewelry virtually unrealistic. Spot gold and offshore gold products involve high leverage; sharp volatility easily triggers margin calls—retail investors should generally avoid them. For those wishing to participate in gold’s price movement, safer alternatives include domestic gold ETFs, on-exchange gold funds, or bank-based gold accumulation plans—offering controlled risk and lower entry barriers. Another psychological trap: many treat gold as a tool for short-term windfalls. They pile into gold heavily at the first sign of a dip—or chase rallies impulsively after minor gains. Yet current fundamentals suggest near-term headwinds remain unresolved: Fed rate-hike expectations may shift abruptly with incoming economic data, and Middle Eastern tensions retain high uncertainty. Bottom-fishing isn’t about all-in buying—it requires phased, disciplined allocation, along with mental preparation for further consolidation or even modest downside. Never allocate your entire capital to gold. Diversification remains essential: gold serves best as a hedge within a balanced portfolio—not as a speculative vehicle for betting your entire net worth. Of course, we must objectively assess potential risks—not just embrace bullish narratives. Key risks center on three fronts. First, U.S. inflation data persistently exceeds expectations, prompting a more hawkish Fed than currently priced—more hikes and longer-higher rates would sustain downward pressure on gold, potentially breaching key support levels. Second, U.S.-Iran tensions ease and Strait of Hormuz shipping normalizes, causing oil prices to fall rapidly—cooling inflation expectations and removing an indirect tailwind for gold. Third, the U.S. economy outperforms expectations, eliminating hard-landing fears and reducing safe-haven demand—leading to sustained outflows from precious metals markets. So, overall—how will gold perform going forward?

Gold Declines as Hormuz Impasse Keeps Rate-Hike Bets Elevated

1 day ago

Gold prices fell while oil surged amid escalating tensions over the Strait of Hormuz, driving energy costs higher and reinforcing expectations for further Federal Reserve interest rate hikes to combat inflation.

bloomberg

2026-09-27

Gold Declines as Hormuz Impasse Keeps Rate-Hike Bets Elevated

Gold Declines as Hormuz Impasse Keeps Rate-Hike Bets Elevated

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