In the fourth week of May, gold experienced a brief period of weak rebound before turning downward again.
On the third day of that week (May 27), gold prices continued to weaken, once again falling below the 4500 USD per ounce mark during trading, quoted at 4489 USD per ounce (as of 5:00 PM), with a daily decline of 0.38%.
Looking back over the entire month of May, spot gold has recorded declines for two consecutive weeks, with a cumulative drop of nearly 3% for the month. Extending the timeline further, since hitting a historic high of nearly 5600 USD per ounce at the beginning of the year, the pullback in gold prices has quietly approached 20%.
Why have gold prices continued to fall?
Since May, the international gold market has continued its volatile downward trend, with the price center steadily declining. Market analysis widely suggests that this round of gold adjustment is not an isolated event but the result of combined influences from macroeconomic policy expectations, capital flows, and geopolitical logic.
First, the surge in long-term U.S. Treasury yields has become a significant factor pressuring gold prices. Since May, the yield on the 30-year U.S. Treasury has been fluctuating at high levels, briefly touching 5.20% during trading on May 20, reaching its highest level since 2007. Although it subsequently retreated, it remains stable above 5%.
The rise in long-term Treasury yields directly increases the opportunity cost of holding gold as a zero-interest asset. In an environment where yields on interest-bearing assets have significantly improved, holding gold not only fails to generate interest but also carries price volatility risks. Consequently, funds have been continuously withdrawn from the gold market, shifting toward interest-bearing assets like bonds.
Second, the sharp reversal in expectations regarding the Federal Reserve's monetary policy has further intensified the downward pressure on gold prices. U.S. CPI rose 3.8% year-on-year in April, with core CPI up 2.8% year-on-year, both exceeding market expectations and breaking the optimistic narrative of steadily declining inflation since the beginning of the year.
In fact, the Fed had already pressed the "pause button" for the third time on April 30, keeping the federal funds rate target range unchanged at 3.50% to 3.75%. According to CME's "FedWatch," the probability of the Fed maintaining rates unchanged by July is 88.6%. The high-interest-rate environment not only suppresses gold's valuation but also diminishes its appeal as an inflation-hedging tool.
Furthermore, the geopolitical risk-aversion logic that previously supported gold's rise is quietly reversing. Although the Middle East situation has seen fluctuations since May, market sensitivity to geopolitical conflicts has noticeably dulled, with risk-aversion sentiment periodically receding. Under the assault of multiple negative factors, spot gold fell for two consecutive weeks. Despite a rebound on Monday (May 25), when prices briefly touched around 4579 USD per ounce, they continued to decline on Wednesday, losing the important psychological level of 4500 USD per ounce.
How do gold holders view the future?
For many ordinary gold holders, the sharp fluctuations in gold prices are quietly changing their mindset and behavior.
Zhang Ning, who has been consistently investing in gold for nearly a year, stated, "I will continue my regular investments within this year, but the amount of additional investment is uncertain and will depend on future conditions."
Previously, Zhang Ning invested 2000 yuan monthly in paper gold. When gold prices rapidly corrected in February this year, he considered it a "pullback to pick up more" and decisively added 8000 yuan. "At that time, I felt it would rise again," he recalled. However, as gold prices continued to weaken, this additional investment has become a losing position.
Investors like Zhang Ning, who find themselves passively watching, are not few, but there are also those who view gold as a long-term allocation.
Liu Chao, who is bullish on gold in the long term, mentioned that he currently holds paper gold and gold ETFs, accounting for about 15% of his personal financial assets. Regarding future holdings, he stated he would continue regular investments and add positions at opportune times, hoping to increase the allocation ratio to 20%. Faced with three consecutive weeks of declines, he admitted that the overall drop this month is not significant and will not affect his holding strategy.
Besides investors like Liu Chao who persist in holding, there are also those who exited early and are waiting for the right moment.
Liu Liu, who has sold all her gold financial products, said, "I sold my gold financial products during the severe volatility in March; the fluctuations were too large, and I didn't want to monitor the market daily anymore." However, her attitude toward physical gold is entirely different: "I bought 20 grams of gold this year, and I definitely won't sell that portion, as it serves as a family risk asset."
As for whether she will buy gold financial products again in the future, she indicated that if the correction is significant, she might buy some more—4300 USD per ounce is her psychological expectation for re-entering the market.
Market Expectations: Short-Term Cooling, Long-Term Still Hot
In market expectations, a distinct characteristic is gradually emerging: "short-term cooling, long-term heating."
Recently, most institutions have turned cautious on gold in the short term. Morgan Stanley was the first to lower its gold target price for the second half of 2026 to 5200 USD per ounce; JPMorgan revised its average gold price forecast for 2026 from 5708 USD per ounce to 5243 USD per ounce; Citigroup is bearish on gold in the short term, predicting that prices will touch 4300 USD per ounce within the next three months.
However, most institutions have not changed their long-term bullish stance. JPMorgan clearly stated in its research report that gold's upward trend is in a "pause, not a reversal," maintaining its target price of 6000 USD per ounce for the fourth quarter of 2026. Citigroup has not turned entirely pessimistic on the medium-term gold market, continuing to maintain a target price of 5000 USD per ounce for the next 6 to 12 months.
Overall, the core logic supporting medium- to long-term bullishness remains solid. The World Gold Council's "Global Gold Demand Trends Report" for the first quarter of 2026 shows that global central banks' net purchases of gold reached 244 tons, higher than the previous quarter and the five-year average. As a strategic asset hedging against "fragmentation risks in the international order" and "sovereign credit currency risks," gold's allocation value remains stable.
The core PCE inflation data to be released on May 28 is seen as a key indicator at present.
Several analysts pointed out that if the data again exceeds expectations, pressure on gold prices will intensify; if a turning point of decline appears, the tightening pattern of high inflation and high interest rates is expected to ease, and gold may usher in a sustained recovery.
Amid fluctuating gold prices, ordinary holders waver in uncertainty, awaiting direction amidst volatility. Some, like Zhang Ning, find themselves passively watching; others, like Liu Chao, actively position themselves; and still others, like Liu Liu, wait quietly for entry... Different choices reflect varied mindsets within the same market.
(Zhang Ning, Liu Chao, and Liu Liu are pseudonyms; this article does not constitute any investment advice.)
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