Since mid-May, the international spot gold price has been in a continuous decline. As of the opening on May 18, the London spot gold price fell below $4,542 per ounce, with an intraday low touching $4,480 per ounce.
On May 18, JPMorgan revised its average gold price forecast for 2026 downward from a previous estimate of $5,708 per ounce to $5,243 per ounce.
Regarding the reasons behind the recent sustained correction in gold prices, Jiang Shu, Chief Analyst at Shanghai Xirang Industrial, analyzed that shortly after the outbreak of US-Iran tensions, gold prices began to show an inverse relationship with oil prices. This inverse relationship is underpinned by a logical chain where oil prices influence inflation, and inflation influences US monetary policy. The primary driver for this round of gold price decline stems from expectations of tighter Federal Reserve monetary policy triggered by inflation expectations under high oil prices.
Jiang Shu further pointed out that as there is currently no sign of oil prices rapidly falling to $60 per barrel, the transmission process where high oil prices elevate inflation and inflation impacts Fed policy is still unfolding. It is highly probable that the main theme for gold prices in the second and third quarters of this year will be volatile correction. "This means the US-Iran conflict has influenced the timing of gold's correction after its rapid surge in the first quarter. For gold prices to shake off the impact of the US-Iran conflict and usher in a more sustained upward trend, we may have to wait until the fourth quarter."
Gao Zhengyang, Special Researcher at SuShang Bank, also stated that the decline in gold prices mainly stems from the upward shift in the oil price center pushing up inflation levels. The significant rebound in US CPI and PPI for April has intensified inflationary pressures, leading to a cooling of expectations for a Fed rate cut within the year. Against this backdrop, rising US Treasury yields and a strengthening US dollar have exerted significant pressure on gold prices.
Gao Zhengyang further analyzed that the current market is in a stage of contest between the pace of Fed policy and the persistence of inflation. In the short term, pressured by expectations of high interest rates, gold prices may maintain a volatile pattern. If subsequent inflation stickiness continues to manifest, increasing resistance for the new Fed Chair to implement rate cuts, gold prices could potentially test lower levels. However, Gao Zhengyang also emphasized that if the Strait of Hormuz can resume normal navigation, leading to a downward shift in the oil price center and a gradual decline in inflation levels, rate cut expectations could heat up, potentially allowing gold prices to stabilize and rebound.
Regarding the subsequent macroeconomic trajectory, Wang Xiang of Bosera Funds believes it still heavily depends on geopolitical developments. In Wang Xiang's view, if the blockage of the Strait of Hormuz is prolonged, the risk premium in oil prices may not be a temporary spike but could gradually translate into more persistent inflation concerns, reinforcing the "high oil prices—high inflation—high interest rates" macroeconomic trade chain. Under this scenario, the rise in long-term US Treasury yields would not only be a result of changing expectations for Fed policy rates but could also include higher inflation risk compensation and term premiums, exerting even more pronounced pressure on gold. Conversely, if the Middle East situation can substantially ease subsequently, oil prices are expected to fall, making a decline in interest rates from current levels reasonable, and gold could also find a window for a rebound.
Looking at short-term trends, SDIC Futures noted in its latest research report that US-Iran negotiations remain unresolved. Although both sides seek an exit, they will likely maintain a tough stance to secure greater leverage. When the Strait of Hormuz resumes navigation has become central to the direction of global commodities. Market sentiment sways with war-related information, leaving gold prices temporarily lacking clear directional guidance. It is advisable to continue viewing gold within a $4,000–$5,000 per ounce range-bound pattern. The corrective wave pattern formed after the international gold price peak of $5,600 per ounce has not yet reversed, and the adjustment may persist for some time. Patience is required to wait for better risk-reward ratio positioning opportunities.
Despite short-term pressure, market analysis generally believes that the medium- to long-term trend for gold remains promising. Looking ahead to the medium and long term, JPMorgan stated that due to a reacceleration in demand in the second half of 2026, the base case scenario still expects gold prices to reach $6,000 per ounce by year-end. Goldman Sachs Group also believes that central banks are expected to increase their gold purchases, helping gold prices recover before the end of the year.
For investors, Gao Zhengyang believes the focus is on how to navigate the current volatile gold price environment. Gao Zhengyang suggests that investors should abandon aggressive strategies like chasing highs and heavy positioning. Instead, they should treat gold as part of their asset allocation, consider building positions in batches at relatively low levels, allocate portfolio proportions reasonably, closely monitor inflation trends and Fed policy signals, and establish a dynamic adjustment mechanism.
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