To The Moon

Gold prices crashed below $5,100, but global gold ETFs still raked in $5.3B in February—ninth straight month of inflows!

Do you see this pullback as a buying opportunity amid geopolitical risks and central bank buying, or will the strong dollar keep pressuring prices?

Are you adding gold to your portfolio now, or waiting for more clarity on interest rates? Share your take on the gold market’s next move below!

International gold prices saw a sharp pullback this week. Pressured by a strong U.S. dollar and rising expectations of interest rate hikes, spot gold plummeted 3% at one point to around $5,015 per ounce, marking the largest single-day decline in nearly a month. Despite the volatile price swings—even a steep drop from recent highs—investors’ enthusiasm for gold allocation has only grown stronger: global gold ETFs recorded a net inflow of $5.3 billion in February, achieving positive capital growth for the ninth consecutive month and setting the strongest start in history.

$Gold - main 2604(GCmain)$ $XAU/USD(XAUUSD.FOREX)$

Dual Suppression from the Dollar and Interest Rates

The direct drivers of gold’s pressure come from two aspects: a strong U.S. dollar and interest rate concerns stemming from evolving inflation expectations. As Middle East conflicts escalate, Persian Gulf oil-producing countries have cut supplies, pushing Brent crude to nearly $120 per barrel at one point. Surging oil prices have heightened fears of stubborn U.S. inflation, in turn boosting bets that the Federal Reserve will maintain high interest rates or even hike them further.

Higher borrowing costs and a strong dollar are typically bearish for non-interest-bearing precious metals. Additionally, amid ongoing global stock market volatility, gold has also served as a source of liquidity—some investors have chosen to sell gold to meet margin calls for other assets. Christopher Wong, a strategist at Oversea-Chinese Banking Corporation, explained: “During periods of market stress driven by geopolitics, investors sometimes sell gold to raise cash. Once this phase passes, geopolitical uncertainty usually supports safe-haven demand, attracting buying on pullbacks.”

According to the latest report from the World Gold Council (WGC), global physical gold ETFs saw inflows of $5.3 billion in February, with total holdings increasing by 26 tons to 4,171 tons. Combined with rising gold prices, the total assets under management (AUM) of global gold ETFs surpassed $700 billion, reaching a record $701 billion. Demand was led by North America, which contributed $4.7 billion in net inflows, extending the nine-month streak of investment demand. The Asian market was equally strong, with $2.3 billion in inflows in February. Europe was the only region with outflows, recording $1.8 billion in redemptions in February, but turned to positive inflows at the end of the month—indicating the outflows were not a trend reversal.

Rising Volatility Reflects a Healthy Market

Regarding the coexistence of gold price pullbacks and capital inflows, Joe Cavatoni, Senior Market Strategist at the World Gold Council, stated that this precisely reflects increased market participation.

He noted that the current annualized volatility of the gold market has risen to 25%—30%, far higher than the industry’s long-term expected level of around 15%. However, rising volatility has three positive implications: first, increased investor interest in gold naturally accompanies greater price swings; second, trend momentum drives trading activity; third, gold’s volatility is increasingly synchronized with other risky assets, indicating expanding market depth.

Cavatoni emphasized that there is no need to overinterpret short-term fluctuations. Even if gold prices performed weakly earlier in the month, in a world full of uncertainties, it is difficult for gold’s long-term upward trend to end. He also warned that the real concern should be structural disruptions in the financial system—unpredictable volatility caused by issues such as transportation bottlenecks, tariffs, or market infrastructure problems.

Long-Term Supports Remain Intact

Despite short-term seesawing between bulls and bears in gold prices, supporting factors remain solid.

While central bank gold purchases have slowed from the peaks of the past three years, official sector buying will continue to provide stability to gold prices. The People’s Bank of China (PBOC) continued to increase its gold reserves in February, extending the buying cycle to 16 months—highlighting official recognition of gold’s strategic value.

Ed Meir, an analyst at Marex, pointed out in a latest report that the direction of geopolitical conflicts will be a key variable: if the conflicts end relatively quickly, the U.S. dollar may weaken and gold prices are expected to rebound; if the war drags on, inflation and interest rate expectations will further push up the dollar and Treasury yields. He advised investors to remain on the sidelines for the time being: “There are times to buy, times to sell, and times when you just need to wait. The latter is the preferred option for now.”

Overall, the gold market is showing a clear tug-of-war between bulls and bears: a strong dollar and interest rate expectations suppress short-term prices, while geopolitical risks, central bank purchases, and ETF inflows form a solid floor. The market is waiting for the next catalyst to break the stalemate.

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