Gold prices dropped below $3,000 per ounce on Monday, with central banks anticipated to persist in gold purchases. Gold traditionally serves as a safe haven, but it can also be sold alongside other assets to mitigate losses.
In March, China’s central bank increased its gold reserves for the fifth consecutive month, acquiring an additional 0.09 million troy ounces. The price of gold reached a peak above $3,100 per ounce last month, closing the first quarter with a 19% increase.
Central Bank Influence
The expectation remains that central banks will continue to buy gold due to geopolitical tensions and economic uncertainty, potentially supporting prices in the future.
With bullion having recently dipped beneath the $3,000 mark, attention turns once again to official sector activity, which for months has lent steady demand. Though the retreat seems sharp, it follows a sharp first-quarter rise—19% to be precise—so in truth, it may be less of a correction and more of a breather.
March saw China’s central bank increase its holdings for a fifth straight month, adding just under 100,000 troy ounces. That move reinforced a pattern observed not only in Asia, but echoed across several emerging economies. There is a clear appetite for diversification; reserves are gradually tilting further away from dollar-denominated assets. That kind of steady purchase activity has, unintentionally or not, offered market participants another anchor point amid the broader uncertainty.
Gold has long been understood as a hedge—not just against inflation, but also systemic risk. However, when drawdowns accelerate across portfolios, even the traditional “safe” stores of value can be liquidated in a rush to meet margin calls or rebalance. The timing of the latest dip, in this regard, doesn’t surprise. What matters more is whether it turns into a sustained unwind or simply invites buying on the pullback.
Market Dynamics and Reactions
From where we stand, intermittent retracements, like Monday’s, may be met with renewed positioning rather than panic. Traders with exposure to options or futures can use near-term volatility to their advantage by re-evaluating strike levels and expiry windows. Short positions, in particular, will require tighter stops given the still-active bid from institutional buyers.
The $3,100 high that printed last month now sits as a ceiling, at least temporarily. Yet the backdrop remains skewed toward caution globally—macroeconomic data releases, central bank commentary, and geopolitical headlines are contributing daily inputs. Those managing delta exposures should be aware that sudden gaps are possible, especially in relatively illiquid hours.
Pricing behaviour remains sensitive to headlines out of large reserve holders. If one of them were to slow or pause accumulation, we’d expect the reaction to be brisk, particularly via the futures curve. Calendar spreads may widen. Intraday scalping becomes less viable in those windows unless accompanied by elevated volume.
We’ve also noted a slight pullback in ETF flows since late March, which could point toward retail hesitation. In contrast, over-the-counter flows tell a different story—suggesting that non-transparent positioning is inching higher. This sort of divergence often precedes price swings that don’t mirror retail consensus.
Those working with gold-linked derivatives, especially those tied to the COMEX or LME, would do well to recheck margin levels. We’ve seen some movement in initial margin requirements, which, if left unattended, can catch less active accounts offside rapidly. Likewise, options dealers should adjust implied vol expectations if gold continues to oscillate around psychological thresholds rather than trending.
The broader context has not gone away. Interest rate expectations remain fluid, especially as inflation numbers in key economies show mixed signals. That puts real yields in flux—a key input for bullion pricing. Right now, the gap between market-derived rates and central bank policy paths remains unresolved. For derivatives market participants, this keeps gamma risk relatively elevated.
Whether $3,000 becomes a familiar footing over the next fortnight or slips further will hinge less on earnings calendars and more on cross-asset correlations. Gold has spent most of this year decoupling from traditional risk assets in phases. That detail is not to be missed.
Market participants would be wise to track not only spot but also term structure developments across the metals complex. Contango signals could become more pronounced if forward pricing bakes in a sustained bid from reserve managers—even as speculative interest cools.
Above all, the data that trickle in over the coming sessions—from CPI figures to central bank minutes—will weigh heavily. Positioning on either side of the trade will need to be nimble, especially as we move into a stretch prone to thin liquidity and overstated reactions. Modeling scenarios ahead of scheduled releases may offer more value now than trading off headlines alone.
