An investor, Ms. Zhao, expressed her dismay: "I didn't expect to buy the dip only to find myself halfway down the mountain. Back in January, when gold prices surged, the market widely predicted gold would reach $6000 per ounce, with some even forecasting $8000. I purchased a 50-gram investment gold bar for nearly 60,000 yuan. But now, the buyback price for this bar is less than 50,000 yuan."
The spot price of gold has breached two critical support levels, $4600 and $4500 per ounce, within two trading sessions. On May 18, the price touched a low of $4480.01 per ounce during the session, marking the lowest level since April. Jewelry gold prices have followed suit, collectively falling below 1400 yuan per gram. The main gold futures contract on the Shanghai Futures Exchange dropped below the 1000 yuan per gram threshold, closing at 999.8 yuan per gram.
Due to the weak performance of gold, another major international bank has revised down its gold price outlook, bringing the total number of major institutions adjusting their forecasts this year to three.
Weakening expectations for interest rate cuts are putting pressure on gold and silver prices. Since hitting a peak of $5598.75 per ounce in late January this year, gold has encountered turbulence and experienced sustained volatility. Overall, its price trajectory has been downward. After falling below $4600 per ounce during trading last Friday, May 15, gold breached the crucial $4500 per ounce level on Monday, May 18, dipping to a low of $4480.01 per ounce.
Silver has experienced even greater volatility. On May 18, silver fell to a low of $73.816 per ounce. The main silver futures contract on the Shanghai Futures Exchange saw a drop of over 10% in early trading, though losses have since narrowed.
What is driving this significant decline in precious metal prices? Zhang Pengyuan, a researcher at Paipaiwang Wealth, attributes the core driver to a reversal in macroeconomic expectations. The stronger-than-expected US inflation data for April has completely overturned market expectations for a Federal Reserve rate cut within the year, even sparking discussions about potential rate hikes. The high-interest-rate environment significantly increases the opportunity cost of holding non-yielding precious metals. Coupled with rate hike expectations, US Treasury yields have risen sharply, attracting capital flow from precious metals into interest-bearing assets. A direct blow comes from weakened physical demand, as India, a major global consumer, has significantly raised import tariffs on gold and silver, dampening physical buying. A shift in market sentiment has amplified the volatility; after accumulating substantial gains previously, profit-taking and speculative capital exited en masse following the change in macroeconomic winds, triggering technical selling.
Data from the US Commodity Futures Trading Commission (CFTC) shows that in the statistical week ending May 12, speculative traders in the gold market increased their net long positions by 4,963 contracts, bringing the total to 100,627 contracts. For silver, speculators' net long positions also grew, increasing by 5,254 contracts to a final total of 16,195 contracts.
Three institutions have revised their price forecasts as gold enters a correction phase. JPMorgan Chase has lowered its average gold price forecast for 2026 from $5708 per ounce to $5243 per ounce, citing softening short-term demand for gold. Analysts at the bank stated in a report released on May 17: "This lull is reflected in the stagnation of trading activity and demand indicators. Total open interest and trading volume for COMEX gold futures remain persistently low, managed money net futures positions hover at low levels, and ETF inflows are also relatively tepid."
Despite the downgrade, the bank maintains a bullish outlook, expecting gold prices to climb to $6000 per ounce by the end of 2026 as demand strengthens in the second half of the year. "We maintain our medium-term bullish outlook and predict that demand for gold from investors and central banks will strengthen again in the second half of 2026 after the significant energy and inflation uncertainties dissipate," the report added.
This marks the third institution this year to lower its gold price forecast. Last week, ANZ Bank also revised its year-end gold target down from $5800 to $5600 and postponed its timeline for reaching $6000 from early 2027 to mid-2027.
In early May, Morgan Stanley had already significantly cut its gold price expectations, stating that the recent sharp decline in gold prices was not an accidental shift in the market trend. The bank lowered its latest gold price target for the second half of 2026 to $5200 per ounce, a substantial reduction from its previous expectation of $5700.
Kitco News's weekly gold survey also indicates lingering concerns in the market about gold in the near term. Among 13 Wall Street analysts, only two (15%) expect gold prices to rise in the coming week, while a significant majority—ten analysts (77%)—predict further price declines. Sentiment on Wall Street has dipped deeply into bearish territory, with professional investors generally holding a pessimistic view on gold's short-term prospects.
However, Ray Dalio, founder of Bridgewater Associates, continues to emphasize the irreplaceability of gold. He recently stated publicly: "Because gold tends to be most useful in times of very bad economic conditions. Looking back at history, in all similar periods, all fiat currencies depreciate, while gold appreciates."
He further emphasized that any investment portfolio should include 5% to 15% in gold.
Currently, gold is the second-largest reserve asset held by global central banks, trailing only the US dollar and surpassing the euro and yen. Dalio believes gold possesses unique advantages such as central bank endorsement and no credit risk. He contends that the world is entering a cycle of "currency devaluation and sovereign credit deterioration," and the demand for de-dollarization will systematically push gold prices higher.
Central banks worldwide are also staunch supporters of gold. In April, the National Bank of Poland once again made substantial gold purchases, bringing the country's gold reserves close to the 600-ton mark. At the current pace of buying, Poland is on track to rank among the top ten countries globally in terms of official gold reserves by 2026. According to the latest official reserve data published by the Polish central bank, the book value of its "monetary gold" had risen to approximately $88.4 billion by the end of April, an increase of nearly $3 billion from the end of March.
Poland is not an isolated case. In recent years, the global wave of central bank gold buying has intensified, particularly among emerging market nations. Data from the World Gold Council shows that from 2022 to 2025, annual central bank gold purchases globally have consistently remained above 1,000 tons, reaching the highest level since the collapse of the Bretton Woods system.
Data indicates that in April, China's central bank increased its gold reserves by 260,000 ounces, the largest single-month increase in nearly two years, following a 160,000-ounce increase in March. Besides China and Poland, central banks in India, Turkey, Singapore, and several Middle Eastern countries have also been consistently adding to their gold allocations in recent years.
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