In recent days, international gold prices have plunged from elevated levels, with New York gold futures falling below $4,200 and Shanghai gold briefly dropping to 890 yuan per gram during intraday trading, a single-day decline of nearly 2%. Investors have been in an uproar 鈥?some say "the pullback is finally here, time to jump in," while others warn "this is just the beginning, don't rush to catch the falling knife." On October 9, domestic gold prices climbed back above 900 yuan per gram, and the situation shifted once again.
On October 7 local time, the Federal Reserve released the minutes from its September Federal Open Market Committee (FOMC) monetary policy meeting. According to reports, most Fed officials expect that another rate hike may be needed this year to combat inflation. Officials unanimously agreed that inflation remains elevated and that progress toward the 2% target has been limited in recent months. As this expectation gained traction, gold immediately came under pressure. Wu Zewei, a special researcher at Suning Bank, believes the meeting minutes reflect officials' vigilance over the pace of inflation decline, pushing the dollar index and Treasury yields higher, which together weighed on gold prices. Additionally, trading liquidity in overseas markets was relatively thin during the extended holiday period, making it easy for even small amounts of capital flows to amplify price swings. Combined with the large accumulation of long positions built up earlier, changes in policy expectations triggered concentrated position reductions, further intensifying the short-term decline.
Li Gang, research director at the China Foreign Exchange Investment Research Institute, believes the gold price decline was mainly driven by a stronger dollar and rising Treasury yields, as the market repriced its expectations for the Fed's future policy path. Although weaker U.S. employment data reduced expectations for an October rate hike, inflation and energy price risks continue to fuel concerns that the Fed will keep rates higher for longer, and even the possibility of another rate hike within the year cannot be ruled out. High-level valuation corrections and macroeconomic repricing are the core factors suppressing gold prices in the short to medium term.
Driven by energy inflation concerns stemming from geopolitical conflicts and renewed rate hike expectations, the 10-year U.S. Treasury yield has been surging. On Wednesday, October 7 local time, the 10-year Treasury yield hit 5.365%, the highest since April 2002. The 30-year bond yield also reached 5.732%, the highest level since May 2002. Although U.S. stock declines have been relatively moderate so far, concerns in the market are mounting as Treasury yields continue to climb and could potentially push toward 6%.
Gold Falls Back to the 8xx Range and May Continue to Drop 鈥?Should You Buy?
On October 8, domestic Shanghai gold fell to 890 yuan per gram during intraday trading, a decline of nearly 2%, returning to the "8xx" range for the first time in nearly two months. Caibai's baseline investment gold price has dropped back to 892.7 yuan per gram. The price of pure gold jewelry from several gold brands has also been lowered successively, with Laomiao, Chow Sang Sang, Chow Tai Fook, and Lao Feng Xiang quoting around 1,240 yuan per gram, while the listed price at Shenzhen Shuibei for gold jewelry dropped to 1,055 yuan per gram.
During the recently concluded National Day holiday, the Shenzhen Shuibei gold and jewelry market was bustling. As an important distribution center for China's gold and jewelry industry, gold sales were brisk during the holiday, with some popular gold bracelets even selling out. Unlike the consumer side, some investors on the investment side had already begun positioning themselves before the holiday. "Prices are falling continuously 鈥?isn't this the perfect time to buy? In the two trading days before the National Day holiday, I had already purchased gold ETFs (exchange-traded funds) in batches," said Mr. Wang, a local resident. He added that the more prices fall, the more excited he gets, because he had bought too little before and now sees a great buying opportunity. Like Mr. Wang, Ms. Lin also remains bullish on gold's long-term performance and purchased 10,000 yuan worth of gold ETFs on October 8. "I happened to have a 50,000 yuan wealth management product mature, and I plan to buy gold ETFs over five trading days," Ms. Lin said. She believes gold prices will rise in the long term, making it worthwhile to position in batches at relatively low points.
It is not just individual investors 鈥?central banks are also actively buying gold. On October 7, data released by the central bank showed that China's gold reserves at the end of September stood at 77.47 million ounces, an increase of 740,000 ounces month-on-month. This marks the 23rd consecutive month of gold purchases since the central bank resumed increasing its holdings in November 2024. Research data from the World Gold Council also shows that global central bank gold demand remains on an upward trend. Among surveyed reserve managers, 45% expect their institutions to increase gold reserves in the next 12 months, a record-breaking proportion that underscores gold's important long-term stable role in official reserves.
Li Gang, research director at the China Foreign Exchange Investment Research Institute, believes gold may still have room to decline further, but it is important to distinguish between a "trend reversal" and a "high-level correction." If U.S. inflation and employment data remain strong, or if oil prices rise further, gold could remain under short-term pressure and even experience a noticeable technical correction.
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