Gold prices have resumed their decline after a brief rally.
As escalating geopolitical tensions in the Middle East push oil prices "past the 100-dollar mark", market fears of resurging inflation and further interest rate hikes by the Federal Reserve have been reignited, seemingly dimming gold's lustre as a safe-haven asset.
On the evening of July 23, international precious metals futures broadly declined. COMEX gold futures fell 2.4% to $4,052.30 per ounce.
On July 24, the domestic precious metals futures market also experienced significant adjustments, tracking the drop in international gold prices. At the time of reporting, the domestic gold price had dipped to a low of 876.22 yuan per gram. Concurrently, domestic gold jewellery prices also fell. Chow Sang Sang's 9999 gold jewellery was priced at 1,227 yuan per gram, plummeting 31 yuan in a single day; Lao Miao Gold's 9999 gold jewellery was quoted at 1,231 yuan per gram, a sharp single-day drop of 27 yuan; and Lao Feng Xiang's 9999 gold jewellery was priced at 1,229 yuan per gram, falling 24 yuan in a single day.
Amidst this violent price volatility, gold is transitioning from the "king of safe havens" to an asset of increasing risk. Some investors who profited last year have now given back all of their gains from that period. Conversely, new investors are entering the market, seeking to short-term bottom-fish on the price swings.
Squeezed between a strengthening US dollar and an uncertain international landscape, can gold still see upward momentum in the future? Should investors take advantage of the low prices or decisively "exit"?
Some Have Lost All of Last Year's Gains, While Others Play Ultra-Short-Term Strategies
"I made over 14% returns investing in gold last year, but I've lost it all this year." Having tasted the sweet, steady profits from gold's surge last year, investor Ms. Zhu spoke with a hint of melancholy about the constantly fluctuating gold prices.
Earlier this year, she believed the volatility in gold was merely a temporary adjustment and consequently increased her position, anticipating another surge. To her surprise, what followed was a "free-fall," with prices dropping from around $4,800 per ounce to the current vicinity of $4,000 per ounce. The yield on her gold ETF investment has fallen to -15%.
"If I cut my losses now, the unrealised loss becomes a real one. But if I don't, current market conditions make a quick recovery unlikely," Ms. Zhu explained. She now resorts to "buying the dips" in an attempt to lower her average cost, hoping to achieve a return through long-term investing and time.
In reality, since mid-year, the trajectory of gold prices has ceased to be a one-way trend. Recently, gold has experienced a "roller-coaster" pattern. Just two days prior to this significant drop, gold had accumulated gains of nearly 3%, briefly and forcefully breaking through the $4,140 per ounce level and surpassing four moving averages. However, prices then plummeted sharply, closing in on the $4,000 per ounce mark again within a single day. This pattern has recurred repeatedly throughout July.
Such volatility in gold prices has also created opportunities for some investors to attempt ultra-short-term trading.
In contrast to Ms. Zhu's long-term perspective, Ms. Li, who has consistently invested in gold via accumulation plans, embarked on an ultra-short-term trading journey after seeing her gold investment returns decline this year. In mid-July, she used 200,000 yuan as principal to buy into a gold accumulation plan, redeeming it just 3 hours later. After deducting fees, she made a profit of nearly 1,000 yuan.
However, this speculative approach is too risky and is not recommended by industry insiders. A banking wealth management professional pointed out that the current intensifying volatility in gold prices increases market risk. Ultra-short-term investing could very likely lead to total capital loss, and investors should avoid short-term speculation involving chasing rallies and selling into dips.
The "Geopolitical Conflict Premium" is Still Playing Out: Who Will Prevail in the Battle of Bulls and Bears?
Currently, with gold prices fluctuating endlessly, market observers believe a tug-of-war between bulls and bears is underway.
"This year, trading in the gold market, whether by individuals or institutions, has been exceptionally painful," a veteran bank trader shared. Despite having navigated the markets for over a decade, he stated that this degree of drawdown and the intensity of the bull-bear battle in the gold market were unprecedented for him.
According to market observers, the current pullback in gold prices is primarily influenced by instability in the Middle East. The latest drop in gold prices is a case in point.
Based on public information, late on Thursday night Beijing time, news of an attack on a Saudi oil tanker by Yemen's Houthi forces was confirmed. International oil prices surged in response, with Brent crude futures breaking through the $100 per barrel integer mark for the first time since late May. This occurred just hours after US President Donald Trump escalated war threats against Iran, vowing to "bomb and destroy" Iranian infrastructure in response to any attack in the Strait of Hormuz. Iran retaliated with a tit-for-tat response, threatening reprisals.
Geopolitical conflicts would typically strengthen gold's safe-haven appeal, but the market's transmission logic in this cycle is entirely different. The market's focus of concern is not the conflict itself, but rather the "stagflation" risk that could be triggered by soaring energy prices – high oil prices would exacerbate inflationary pressures, thereby forcing the Federal Reserve to maintain or even tighten monetary policy further.
The market has not seen a one-sided trend; the battle between bulls and bears remains fiercely contested. Wind data shows that the bull-bear confrontation in spot gold has been seesawing recently. Since July, the dominant position has alternated continuously, leading to violent fluctuations in the gold market. For instance, on July 21, the proportion of bullish positions in spot gold reached 79%, but by July 22, the proportion of bearish positions rapidly soared to 77%. Looking at the outcomes of recent rounds, the $4,000 per ounce level has become a critical battleground for both sides.
Financial regulatory expert Zhou Yiqin explained that currently, the bull side consists of central banks that are persistently purchasing gold, along with gold ETF and physical gold buyers. The bear side comprises speculative capital betting on major negative developments, as well as individual investors and institutions selling ETFs to take profits at higher levels.
On the bull side, central banks remain the main buyers of gold. According to data from the People's Bank of China (PBoC), gold reserves increased by 480,000 ounces to 75.44 million ounces in June 2026, marking the 20th consecutive month of accumulation, with the monthly increase hitting a new high since October 2023. Furthermore, a survey by the World Gold Council indicated that surveyed central banks this year showed continuously strengthening optimism regarding gold as a future reserve asset, along with a concurrently increased willingness to add to their gold reserves.
On the bear side, some major institutions are beginning to short gold. Reports indicate that Bank of America analyst Paul Ciana recently stated in a report that gold is likely to remain under pressure during August and September, adding that prices might eventually need to test support around $3,600 per ounce before finding a firmer bottom. He pointed out that this gold correction "has only lasted 24 weeks, compared to a prior upward cycle of 121 weeks," noting that the correction duration "is significantly short relative to the preceding uptrend."
Currently, Citigroup and Fitch have also joined the bearish camp on gold.
Gold Prices Swing Repeatedly: Is it a "Golden Buying Opportunity" or a "Signal to Exit"?
Looking ahead, with a mix of bullish and bearish factors, the risk of gold investment continues to rise, and market views on the future direction of gold prices show significant divergence. Is current gold a "golden pit" (buying opportunity) or a "signal to run"?
Based on current institutional sentiment, the pessimistic camp believes that gold's adjustment is far from over, and a short-term bottom is hard to determine. Some institutions argue that, affected by the persistent disturbance of the US-Iran conflict and the Fed's hawkish stance, the recurring expectation of interest rate hikes will continue to limit the rebound space for precious metals. Future direction depends on whether international gold prices can hold key levels. The optimistic camp, however, contends that the long-term logic for price growth in gold remains unchanged, and a structural bull market is still intact. Some institutions remain bullish on the long-term market.
The Chief Investment Office of UBS Wealth Management believes the gold market is still digesting the hawkish signals from Fed Chair Warsh and the bond market's expectations for higher US policy rates. If US economic activity surprises to the upside and new employment data points to a tighter labour market, coupled with further increases in oil prices, gold's near-term outlook could remain challenging, potentially facing further downward pressure.
"What the gold market truly needs right now is stronger investment demand," UBS said. In the short term, the market appears to be at an impasse. However, short-term price weakness is not a reason to abandon gold. The longer-term narrative for gold remains clear and supportive. From a diversification perspective, UBS remains constructive on gold, especially for investors who prefer real assets and have a multi-generational perspective.
Zhou Yiqin believes that in the short term, the bull-bear battle will remain intense, making a one-sided upward trend difficult. However, in the medium to long term, sustained gold purchases by global central banks and geopolitical uncertainties will support the floor for gold prices.
"This round of adjustment is not yet sufficient; investors should not blindly buy the dip," Zhou Yiqin cautioned. He suggested investors could use financial instruments like gold accumulation plans or gold ETFs for regular, cost-averaging investments. He specifically warned that non-professional investors should stay away from leveraged gold financial products and absolutely avoid short-term speculation involving chasing rallies and selling into dips.
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