Gold prices have hit a new low for the year, with spot gold falling below the $4,000 mark. This has led to a significant drop in domestic gold jewelry prices, with some brands seeing a per-gram decline of nearly 500 yuan from the year's peak.
Where to begin
The Industrial and Commercial Bank of China has halted personal precious metals bidding transactions. Following the sharp decline in gold prices, multiple banks have adjusted their gold-related businesses, collectively moving to "deleverage."
Gold's recent performance
On the 25th, spot gold experienced volatile trading. As of the latest update, the price was $3,985.070 per ounce, down 0.17%.
The previous day, on the 24th, spot gold saw a significant plunge, breaking below the $4,000 per ounce level during the session. It closed at $3,991.7 per ounce, a drop of nearly 3%. This represents a retreat of approximately 30% from the historical high of $5,598.750 per ounce reached earlier this year.
Impact on retail prices
This decline has directly impacted domestic branded gold jewelry prices. For instance, the per-gram price for Chow Sang Sang jewelry was 1,221 yuan, down 19 yuan for the day and 49 yuan over two days. The current price is 487 yuan lower than the year's peak. Similarly, Lao Feng Xiang jewelry was priced at 1,215 yuan per gram, down 26 yuan for the day and 53 yuan over two days, marking a 498 yuan drop from the year's high.
Expert analysis on the decline
Deng Zhijian, Senior Investment Strategist at DBS Bank (China), attributed the fall in gold prices primarily to interest rate hike expectations triggered by US inflation. While inflation appears moderate, tail risks from factors like rising capital expenditures and debt are prompting countries to implement preemptive defensive rate hikes, which in turn puts downward pressure on gold.
Yuan Zheng, a precious metals researcher at Galaxy Futures, pointed to the Federal Reserve's June FOMC meeting, which kept rates unchanged. However, the dot plot indicated one potential rate hike in 2026, and the hawkish stance of Fed Chair Waller has increased market expectations for a rate hike before year-end. This has boosted the US dollar index and 10-year Treasury yields, suppressing precious metals valuations. Furthermore, stronger-than-expected US non-farm payroll and inflation data for May have reduced the Fed's incentive for monetary easing. Although falling oil prices might ease subsequent imported inflationary pressures, the current absolute level of inflation still supports a hawkish policy stance.
Long-term outlook for precious metals
Shenyin & Wanguo Futures stated in a morning note on the 25th that, from a medium to long-term perspective, the price center for precious metals still has a foundation for sustained upward movement. This is due to elevated global geopolitical risk, ongoing restructuring of the political and economic order, intensifying US fiscal pressures, and the continued process of de-dollarization, which supports the trend of global central banks increasing their gold reserves. Metals like silver, platinum, and palladium, which possess both financial and industrial attributes, generally follow the broader precious metals sector. Their potential for significant upside relies on support from industrial demand.
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