As international gold prices experience severe fluctuations near historic highs, gold has evolved from a traditional safe-haven asset into one of the world's most volatile risk assets. Concurrently, significant divergences have emerged among international institutions regarding their outlook on gold price trends.
In January of this year, the international gold price accelerated its rise from just over $4,300 per ounce to nearly $5,600 per ounce, only to experience a cliff-like decline subsequently. It fell below $4,100 per ounce in late March. Although a rebound occurred in April, volatility has intensified. Data shows that from March 2 to March 23, spot gold accumulated a decline of 17.45%. Over the same period, the Nasdaq index fell by only 3.18%, and the Hang Seng Index dropped by 8.44%. When investors most needed a safe harbor, gold not only failed to provide shelter but fell more sharply than equities. This has left some FOF fund managers, who previously considered gold a cornerstone for portfolio hedging, in a difficult position. Their revered allocation strategies—combinations such as "gold + Nasdaq + dividends"—have completely failed in a market where gold and equity markets plummeted in sync.
Why has gold lost its safe-haven status? The reasons are threefold.
First, trading has become extremely crowded. The Bank of America Global Fund Manager Survey indicates that "long gold" has been viewed as the most crowded trade for several consecutive months. In March, nearly 40% of surveyed fund managers believed gold valuations were already elevated. Crowdedness implies fragility; once sentiment reverses, concentrated position unwinding can trigger a stampede.
Second, the transmission path of liquidity shocks has changed. During broad-based asset declines, investors face margin call pressures. Due to its excellent liquidity, gold has instead become the asset of choice to be sold for cash. Massive stop-loss orders and quantitative selling have triggered a negative feedback loop of "decline—selloff—further decline."
Third, the fundamental pricing logic has shifted. In 2025, factors such as central bank purchases, geopolitical safe-haven demand, and concerns over US dollar credibility drove gold prices ever higher, significantly weakening gold's traditional inverse relationship with real interest rates. However, entering 2026, the correlation between gold and interest rates has returned to elevated levels. Gold has transformed from a volatility stabilizer into a risk amplifier.
Judging whether an asset is in a bubble hinges not on whether it is "expensive," but on what foundation its price is built. From this perspective, the current high valuation of gold rests on an unstable foundation.
Fund flows have already sent a clear signal of retreat. In March, global physically-backed gold exchange-traded funds (ETFs) experienced approximately $12 billion in monthly net outflows, a record high. North American markets alone saw net outflows as high as $13 billion in a single month. Speculative net-long positions in COMEX gold futures have fallen to their lowest levels in recent years. The marginal capital that pushed gold prices near historic highs is rapidly exiting.
Simultaneously, the Federal Reserve paused its rate-cutting cycle for the third time on April 30, maintaining the federal funds rate target range at 3.50% to 3.75%. The probability of rates remaining unchanged for the rest of the year has risen to 85%. The market previously widely bet that a rate-cutting cycle would push gold prices higher, a core assumption now being disproven by reality. As a non-yielding asset, gold's holding cost is substantial in a high-interest-rate environment. On May 15, US Treasury yields continued to climb, with the 10-year yield briefly surpassing 4.59%, hitting a new high since May of last year. The 30-year yield broke above 5.13%, reaching a new high for the year, directly pressuring gold prices. A more challenging variable comes from the supply side: the Middle East conflict is pushing up energy prices, with high oil prices driving inflation expectations higher, which in turn narrows the scope for potential rate cuts.
Currently, predictions from international institutions on gold price trends vary widely, even contradicting each other. Wells Fargo recently forecast that gold could reach $8,000 per ounce by 2027, while Morgan Stanley significantly lowered its target price to $5,200 per ounce. Goldman Sachs remains confident that gold will resume its upward trend by year-end, whereas Citigroup warns of a potential drop to $4,300 per ounce within three months.
The factors supporting the previous phase of gold price increases are gradually loosening. The extent and pace of future gold price declines will depend on how and to what degree these factors unwind. For instance, if expectations for a Fed rate cut this year are completely dashed, or even signals of renewed rate hikes emerge, gold prices could face declines far exceeding the current scale. Another factor is the sustainability of global central bank gold purchases. In Q1 2026, global central banks were net purchasers of 244 tons. However, several central banks have begun reversing course. Notably, Turkey's recent sale of nearly 120 tons of gold and Poland's sale of part of its gold reserves have sent a chill through the market. Should demand from more central banks reverse, the pricing anchor for gold will face a significant revaluation.
Furthermore, the pace of speculative capital exit is crucial. Currently, COMEX gold net-long positions still have considerable room for reduction from their January peak. Under a sentiment reversal, the unwinding of these positions could accelerate gold's decline.
Reportedly, DoubleLine Capital founder Jeff Gundlach reiterated his bearish stance following the Fed's April meeting, clearly stating he is currently avoiding gold, does not recommend new allocations, and warned that a drop below $4,000 per ounce cannot be ruled out.
In summary, gold is no longer a safe-haven tool but the risk itself. The supporting factors for continuously higher gold prices are steadily loosening, while downward pressures are gathering beneath the surface. Having risen excessively, international gold prices may also fall excessively in the future. From a medium- to long-term perspective, gold prices will likely fall below $4,000 per ounce eventually, finding stability only at a reasonable price level. Changes in international gold prices will inevitably impact domestic prices, making it essential to heighten risk awareness.
Comments