The international gold market has undergone a substantial correction since 2026.
The price of COMEX gold has gradually retreated from its intra-year peak of $5,709 per ounce, recently fluctuating around the $4,000 per ounce level, even breaching it at one point, representing a significant drawdown of approximately 30% from its historical highs.
This adjustment has drawn widespread market attention, with investors divided on whether the long-term investment thesis for gold has fundamentally changed.
This analysis aims to examine the causes of this gold price correction, its historical context, and viable pathways for market participation through ETF instruments, integrating current market themes and professional research frameworks.
Roots of the Correction: A Convergence of Multiple Factors
Understanding the current gold price trend requires starting from the core framework of gold pricing.
As a non-yielding asset, gold's opportunity cost is primarily determined by real interest rates; simultaneously, as a safe-haven asset with monetary attributes, its price is also influenced by the US dollar credit system, geopolitical risk premiums, and global central bank reserve management strategies.
The current correction is precisely the result of a confluence of these factors.
The rapid rise in real interest rates is the primary factor pressuring gold prices in this cycle.
In the first half of 2026, ongoing Middle East geopolitical conflicts continued to push energy prices higher, with Brent crude oil maintaining elevated levels, exacerbating global imported inflation pressures.
Concurrently, US labor market data has remained robust, with non-farm payrolls adding 172,000 jobs in May 2026, far exceeding market expectations of 85,000, and the unemployment rate holding at a low level of 4.3%.
Mutually reinforcing wage growth and sticky inflation prompted a sharp shift in market expectations for Federal Reserve monetary policy from "rate cuts" to "rate hikes."
Following the appointment of the new Fed Chair, Warsh, his monetarist school background reinforced market perceptions of a firm resolve to control inflation, further pushing up longer-term real interest rate levels.
The rise in the 10-year US Treasury real yield directly increased the holding cost of gold, constituting the most direct pressure on its price.
The liquidity drain and asset rebalancing triggered by geopolitical conflicts have temporarily weakened gold's safe-haven appeal.
Historical experience shows that during the initial phase of extreme risk events, markets often face margin calls and redemption pressures, with investors tending to sell the most liquid assets to raise cash, during which gold is frequently used as a "source of funds."
Furthermore, the continued outperformance of the artificial intelligence industry's boom has attracted substantial incremental capital into equity assets, creating a certain diversion of funds that might otherwise be allocated to gold.
Sustained outflows from tactical trading funds have exacerbated the market adjustment.
Analysis indicates that holdings in tactical trading vehicles, represented by US gold ETFs, have declined continuously from over 1,100 tonnes at the beginning of 2026 to around 1,020 tonnes, reflecting that trading capital operating within the real interest rate framework is still reducing positions.
However, it is noteworthy that the pace of these outflows has gradually slowed, suggesting that selling pressure from tactical funds is diminishing at the margin.
Research points out that the impact of outflows from Western trading books is gradually weakening, as this trading capital has largely completed its selling.
From the perspective of central bank operations, clear supportive buying has emerged at lower price levels.
In May 2026, the People's Bank of China increased its gold holdings by 9.95 tonnes, marking the 19th consecutive month of additions, bringing total holdings to 2,331 tonnes by the end of May.
During April, when the gold price correction was more pronounced (London gold once fell below $4,100 per ounce), the central bank purchased over 8 tonnes in a single month.
Industry insiders suggest this operation sends a clear strategic signal: against the backdrop of the multipolar evolution of the global monetary system, gold's status as a reserve asset is still being elevated.
Historical Context: Trend Unchanged, Correction Not a Reversal
A systematic review of gold price movements over the past half-century reveals that since the collapse of the Bretton Woods system in 1971 and the formal decoupling of gold from the US dollar, the gold market has experienced three typical major bull markets.
Understanding the core drivers and termination causes of each bull cycle helps form a clearer judgment of the current positioning.
The first bull market (1971 to 1980) saw the COMEX gold price rise from below $40 per ounce to over $800, a gain exceeding 20 times.
It was driven by the reconstruction of US dollar credibility post-Bretton Woods, global inflation triggered by the two oil crises, and geopolitical turmoil.
This bull cycle ended due to the Fed, under Volcker's leadership, implementing extremely tight monetary policy, with the effective federal funds rate once approaching 20%, using forceful measures to curb inflation and rebuild dollar credibility.
The second bull market (2001 to 2011) saw the gold price rise from $500 to over $1,900.
The bursting of the dot-com bubble, the 9/11 attacks, the subprime mortgage crisis, and the European debt crisis successively impacted the global financial system, while the intrinsic growth momentum of the US economy weakened and government debt continued to expand.
The Fed, under the leadership of Greenspan and Bernanke, initiated a prolonged period of monetary easing and quantitative easing, coupled with the introduction of innovative investment vehicles like gold ETFs that broadened capital participation channels, jointly driving the long-term upward trend in gold prices.
The end of this bull cycle was closely related to the Fed signaling tapering of asset purchases in 2013, leading the market to price in a liquidity turning point.
The third bull market (2018 to present) started with gold around $1,600, reaching a peak above $5,700.
The drivers of this cycle differ structurally from the previous two: beyond declining real interest rates and geopolitical safe-haven demand, the persistent expansion of the US fiscal deficit, challenges to the US dollar credit system, and systematic gold accumulation by global central banks constitute more fundamental supporting forces.
Analysis indicates that the current US national debt stands at $39.2 trillion, with the Fed holding $4.47 trillion, accounting for approximately 11.4%.
In a high-interest-rate environment with the 10-year Treasury yield above 4.5% and the 2-year yield above 4%, the bond market itself is relatively fragile.
If certain countries cease purchasing US Treasuries, and without Fed buying support, US fiscal financing rates could remain elevated, which would further weaken US dollar credibility, providing support for gold prices from a medium- to long-term perspective.
Industry insiders note that looking back at historical gold bull markets reveals two points: first, the end of a gold bull market is typically accompanied by a temporary restoration of US dollar credibility; currently, the expansion of the US fiscal deficit and debt levels continues, and the global trend of reserve diversification and "de-dollarization" shows no signs of reversal.
Second, corrections of around 30% during bull markets are not uncommon; reviewing the bull markets of the 1970s and 2000s, gold prices experienced significant periodic adjustments during their long-term upward trajectories.
Research maintains the view that "short-term gold prices may continue adjusting due to inflation expectations, but the medium- to long-term bullish direction remains unchanged, with new highs anticipated."
Currently, domestic investors have increasingly diverse ways to participate in the gold market.
Among them, ETF products linked to the Shanghai Gold Exchange's Shanghai Gold Benchmark Price (contract code SHAU) have gained widespread attention due to their transparent operation and convenient trading.
The Shanghai Gold pricing mechanism is a domestically established Renminbi-denominated gold benchmark price, reflecting the genuine supply and demand dynamics of the onshore market.
Compared to the international gold price, its Renminbi-denominated characteristic can, to some extent, mitigate the impact of exchange rate fluctuations on investment returns.
Participating through ETFs allows investors to avoid the complexities of physical gold storage, authentication, and delivery, while gaining returns highly correlated with the spot gold price and enjoying the liquidity advantages of exchange-traded products.
Among relevant ETF products, those with larger scale and ample liquidity often offer a better trading experience.
The GF Gold ETF (518600, with feeder fund classes A/C/F: 008986/008987/021738) invests in the Shanghai Gold Exchange's Shanghai Gold Benchmark Price contract, aiming to deliver investment returns consistent with the performance of the Shanghai Gold price.
As of June 24th, among peer products using the Shanghai Gold Exchange Shanghai Gold Benchmark Price (contract code: SHAU) afternoon fixing as their performance benchmark, the GF Gold ETF (518600) had a latest scale exceeding 7.9 billion, with a year-to-date average daily turnover of 423 million, ranking first in its category for both metrics.
Risk Warning: The above information is for reference only and does not constitute investment advice.
Market entry carries risks; investment requires caution.
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