The relentless rally in international gold prices seen at the start of the year has come to a halt.
According to Wind data, COMEX gold futures breached the key $4,000 per ounce level during trading on June 24, hitting a low of $3,975.7 per ounce. The futures contract continued to hover around the $4,000 mark on June 25.
As of the close on June 24, COMEX gold futures had not only erased all gains made in the year but had also fallen by 9.43%.
Despite this, retail gold prices from major jewelers like Chow Tai Fook and Chow Sang Sang remain above 1,000 yuan per gram.
Is there still an opportunity for gold this year? Industry insiders believe short-term prices will remain volatile, with a technical decline to the key support level of $3,800 per ounce not ruled out. The future trajectory of gold prices remains highly uncertain and is largely dependent on the movement of US CPI data.
A Fall from Historic Highs: Gold Breaks Key $4,000 Level
Gold was one of the most closely watched investment assets at the beginning of 2026.
Its price action lived up to expectations, with COMEX gold futures breaking through the historic milestones of $5,000 and $5,500 per ounce in January. By the end of January, the contract even surpassed $5,700 per ounce intraday, setting a new all-time high.
However, the good times were short-lived. International gold prices subsequently began a volatile descent. After falling below $5,000 per ounce in mid-March, COMEX gold futures continued to fluctuate below that level.
Just over three months later, in late June, COMEX gold futures once again fell below $4,000 per ounce, touching an intraday low of $3,975.7. This brings the price back to levels last seen in late September 2025, representing a 30% decline from the peak at the end of January.
Reasons Behind the Recent Decline
Wang Hongying, President of the China (Hong Kong) Financial Derivatives Investment Research Institute, attributed the recent sustained decline in international gold prices to two main factors. First, US inflation hit a three-year high in May, and new Federal Reserve Chair Kevin Warsh expressed concerns about prices. Consequently, market participants widely believe the Fed's monetary policy is likely to shift from previous rate cuts back to a neutral stance, with the probability of rate hikes increasing further, thereby putting downward pressure on gold. Second, the military tensions between the US and Iran have further eased, reducing safe-haven demand for gold holdings. Combined with recent profit-taking by investors, this has led to a wave-like decline in gold prices.
Following Kevin Warsh's first public appearance on June 17, where the Fed held rates steady, the updated dot plot showed that 9 out of 18 officials projected at least one rate hike by the end of the year.
After this news, CME's FedWatch Tool indicated that market expectations for a 25 basis point Fed rate hike in July surged from 8.5% the previous day to 38.5%, while the probability for a September hike rose from nearly 30% to over 65%.
Amid the persistent price decline, gold ETFs have seen continuous outflows. Wind data shows that as of June 24, 20 gold ETFs had net outflows exceeding 12.1 billion yuan in June, with all but one experiencing net redemptions.
Outlook for Gold: Monitoring Fed Policy Closely
Looking ahead, is there a chance for gold prices to recover in the second half of the year?
Wang Hongying noted that although the gold price briefly fell below $4,000 per ounce, at this level, investor positioning and trading volume have increased to some extent. This suggests that, at least in the short term, the $4,000 level remains a balance point acknowledged by both bulls and bears. "Short-term gold prices will likely remain volatile, and a technical decline to the key support level of $3,800 per ounce cannot be ruled out. The future direction of gold prices is still highly variable and depends on changes in US CPI."
However, the gold market also faces some positive factors. Wang pointed out that central banks worldwide remain committed to de-dollarization, with reducing US Treasury holdings and increasing gold reserves being a common choice. Over a longer horizon, persistently high US government debt levels and the US-dominated financial and settlement framework are causing deep concern among non-US countries. Therefore, increasing gold holdings has become a crucial national policy foundation for each country's financial security.
"Once US CPI is brought under control and prices stop rising further, the Fed's monetary policy is expected to turn neutral. We anticipate gold prices could potentially rebound in the fourth quarter of this year, possibly returning to a range of $4,200 to $4,500 per ounce," Wang added.
Renowned economist Pan Helin stated that predicting specific gold prices is not advisable, as both timing and pricing are flawed investment approaches. The most critical aspect is understanding the underlying logic of gold prices. Currently, the primary headwind for gold is the risk of Fed rate hikes. The market expects a hike in September, with a minority anticipating three hikes before March next year. A stronger US dollar will inevitably lead to lower gold prices. "Therefore, gold prices may only find a bottom when the Fed definitively signals an end to rate hikes. Based on current conditions, this might not occur until the end of 2027."
Overall, industry professionals believe gold prices will continue to fluctuate in the near term. Investors should remain focused on the trajectory of US CPI and the Federal Reserve's interest rate decisions moving forward.
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