Gold prices have been experiencing a volatile decline recently. As of the time of writing, spot gold is trading at $4468.55 per ounce.
Since hitting a peak of $5598.75 per ounce in late January, the price of gold has retreated by over $1000 per ounce, currently hovering around the $4500 level. The overall trend has been one of reaching a high and then shifting lower. As gold prices have retreated, major international investment banks have also turned bearish on the metal.
Concurrently, news of "domestic gold prices falling below 980 yuan per gram" has become a hot topic online. On the 2nd, a media visit to gold retailers in Beijing revealed that the retail price for mainstream brand pure gold jewelry in the Beijing market generally falls within the range of 1340 to 1370 yuan per gram. Compared to the high point at the beginning of the year, which was between 1600 and 1700 yuan per gram, the price per gram has dropped by over 300 yuan, representing a decline of approximately twenty percent.
On June 3rd, it was reported from a major Beijing jewelry store that the number of customers purchasing investment gold bars has seen a significant recent decline, with staff noting a drop of about sixty percent.
Significant Drop in Investment Bar Purchases
On June 3rd, the topic "domestic gold price falls below 980 yuan per gram" trended on social media.
A visit to a prominent Beijing gold and jewelry store on June 3rd revealed a large screen at the elevator entrance on the fourth floor displaying the real-time investment base gold price of 978 yuan per gram. At the investment gold bar counter, three staff members were attending to customers, with only two customers browsing the bars. One of these customers left after inquiring about the price.
Staff at the investment bar counter indicated that the 100-gram and 20-gram bars are currently relatively popular with consumers. Compared to the peak period a few months ago, the number of customers purchasing investment gold bars has decreased by approximately sixty percent recently. "During the period when gold prices surged significantly, buying investment bars required queuing in long lines, and counters were often surrounded by several layers of people," a staff member said. "Now, the number of people coming to buy bars is influenced by the daily price fluctuations and weather conditions."
In the gold jewelry section on the first floor of the same store, there were also instances where staff outnumbered customers at some counters. One salesperson explained that the price for zodiac-themed gold bars at their counter was 1158 yuan per gram, over 200 yuan cheaper than the highest point this year. Recently, it has mainly been consumers with specific needs purchasing various gold jewelry items. In their view, the number of consumers buying gold jewelry has not changed significantly, with more people visiting on weekends.
Five Major Banks Issue Collective Bearish Outlook
Recently, Commerzbank revised its gold price forecast for the end of 2026 down to $4800 per ounce from $5000. However, the bank maintained its price forecast of $5200 per ounce for the end of 2027.
Commerzbank is now the fifth major international investment bank to turn bearish on gold.
Just in mid-May, Citibank publicly expressed a bearish view on gold's short-term trajectory, predicting that prices could reach $4300 per ounce over the next zero to three months.
Citibank's concerns are grounded in reality: if the U.S. and Iran successfully reach a consensus on cooperation and shipping order in the Strait of Hormuz is fully restored, international oil prices could return to pre-conflict levels. This would likely lead to a rapid weakening of market inflation sentiment. If the pace of nominal interest rate cuts lags behind the pace of declining inflation, real interest rates would consequently rise, thereby putting pressure on gold prices. Citibank set a zero to three-month gold price target of $4300 per ounce, noting that prices could fall significantly below this level in the event of a major risk-off event.
After gold hit a high of $5598.75 per ounce at the end of January this year, it entered a prolonged period of adjustment. Although there have been some rebounds during this time, the overall price center has been shifting lower.
As gold entered this adjustment phase, institutions began to revise down their price outlooks. Shortly before Citibank's downgrade, JPMorgan Chase also lowered its average gold price forecast for 2026 to $5243 per ounce from $5708.
The first major bank to initiate these downward revisions was Morgan Stanley, which, as early as the end of April, had already lowered its latest gold price target for the second half of 2026 to $5200 per ounce, significantly below its previous expectation of $5700, marking a major adjustment.
Morgan Stanley's rationale centered on geopolitical friction leading to rising real interest rates and a delay in Federal Reserve rate cuts, which it said had fundamentally altered the macroeconomic landscape. Gold typically strengthens in a declining interest rate environment, but the current sustained high rates have broken the traditional price logic, prompting investors to reposition. The situation has thus reversed: high real interest rates make bonds more attractive, significantly reducing the appeal of non-yielding gold. Morgan Stanley emphasized that this change has restored the classic negative correlation between gold and real interest rates to normalcy—a relationship that had weakened considerably during gold's surge from 2025 to early 2026 but has now seen its linkage return to high levels.
Simultaneously, central bank operations are also putting pressure on gold prices. Central banks in several emerging markets, including Turkey, have begun selling their gold reserves, further weighing on prices. Additionally, gold ETF flows have turned to net outflows, with investors who bought heavily earlier exiting quickly, accelerating the price decline.
Subsequently, ANZ Bank also revised its year-end gold price target down to $5600 per ounce from $5800, and postponed the projected timing for gold to reach $6000 from early 2027 to mid-2027.
ANZ analysts noted, "The market currently seems caught in a dilemma between geopolitical anxiety and concerns about rising inflation." Meanwhile, physical gold demand may also face risks, as the Indian Prime Minister has reportedly called on citizens to refrain from buying gold for the next year to help safeguard the country's foreign exchange reserves.
Surpassing U.S. Treasuries
Gold Becomes the Largest Official Reserve Asset Globally
According to a report, the European Central Bank stated on the 2nd that by the end of 2025, gold's share of total global official reserve assets had risen to 27%, surpassing U.S. Treasury securities to become the largest official reserve asset globally.
The report indicated that the share of U.S. Treasury securities in global official reserve assets fell to 22%, while other U.S. dollar-denominated reserve assets accounted for 20%, and euro-denominated reserve assets made up 15%.
The report attributes the significant increase in gold's reserve share primarily to valuation effects. Benefiting from consecutive explosive surges in the international gold price in 2024 and 2025, the value of gold assets has risen, thereby securing a larger share of global official reserves.
Survey data cited in the report shows that despite gold prices being at historical highs, central bank gold purchases in 2025 remained at elevated levels. The European Central Bank stated that amid rising geopolitical risks, central banks buying gold to enhance the resilience of their balance sheets is not only for asset diversification but also to hedge against geopolitical risks.
Analysts believe that with expectations for the Federal Reserve to continue cutting rates in 2026 guiding real interest rates lower, coupled with global geopolitical uncertainty, the trend of central banks globally increasing their gold holdings is unlikely to reverse in the short term. Against this backdrop, the international monetary system is accelerating its shift from the past "unipolar system" towards a "multipolar reserve system" constituted by gold and multiple national currencies.
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