Gold prices have resumed their decline after a brief rally, as renewed fears of inflation and further Federal Reserve interest rate hikes, fueled by Middle East geopolitical tensions pushing oil prices above $100 per barrel, have dimmed the metal's luster as a safe haven.
On the evening of July 23rd, international precious metals futures broadly declined. COMEX gold futures fell 2.4% to $4,052.30 per ounce.
On July 24th, domestic precious metals futures markets also saw significant adjustments following the drop in international gold prices. At the time of reporting, the domestic gold price had dipped to a low of 876.22 yuan per gram. Meanwhile, domestic gold jewelry prices also fell. Chow Sang Sang 24k gold jewelry was quoted at 1,227 yuan per gram, down 31 yuan in a single day; Lao Miao Gold 24k gold jewelry was quoted at 1,231 yuan per gram, down 27 yuan in a single day; and Lao Feng Xiang 24k gold jewelry was quoted at 1,229 yuan per gram, down 24 yuan in a single day.
Amidst this intense price volatility, gold is transitioning from a 'safe-haven king' to a riskier asset. Some investors who profited last year have now seen all their gains from 2026 erased. Conversely, new investors are attempting to capitalize on price swings for short-term bargains.
Caught between a strengthening U.S. dollar and unclear international conditions, does gold still have upside potential? Should investors take advantage of lower prices to position themselves, or is it a clear signal to exit?
Some Investors Lost All of Last Year's Gains; Others Turn to Ultra-Short-Term Trading
"Last year, my gold investment returns exceeded 14%, but this year, I've lost it all," said investor Ms. Zhu, her tone tinged with regret as she faced the recent volatile gold prices, having grown accustomed to the steady profits from last year's gold surge.
Earlier this year, she thought the gold price correction was just a temporary adjustment. So, she added to her position, anticipating another rally. However, the outcome was an unexpected and significant decline, with prices falling from around $4,800 per ounce to near $4,000 per ounce. Her return on gold ETF investment has dropped to -15%.
"If I cut my losses now, the unrealized loss becomes real. But if I don't, the current market conditions make a quick recovery seem unlikely," Ms. Zhu told reporters. She now resorts to buying on dips to average down her overall cost, hoping long-term investment will eventually yield returns.
In fact, gold prices have not followed a one-way trend since mid-year. Recently, the market has been on a rollercoaster. Just two days before the major drop, gold had rallied nearly 3%, breaking above $4,140 per ounce and surpassing four moving averages. However, it then plummeted again in a single day, approaching the $4,000 per ounce level. This pattern has repeated several times in July.
Such volatility has become a gateway for some investors trying ultra-short-term trading.
Unlike Ms. Zhu's long-term approach, Ms. Li, who has been investing in gold accumulation plans, shifted to ultra-short-term trading after her returns turned negative this year. In mid-July, she invested 200,000 yuan in a gold accumulation plan and redeemed it just three hours later. After deducting fees, she earned nearly 1,000 yuan.
However, industry insiders do not recommend this speculative approach due to its high risk. A banking wealth management professional noted that current gold price volatility amplifies market risk, and ultra-short-term trading could easily lead to total losses. Investors are advised to avoid chasing trends or panic selling in short-term speculation.
'Geopolitical Conflict Premium' Persists as the Bull-Bear Battle Continues
Market analysts believe a tug-of-war between bulls and bears is currently underway amidst the ongoing gold price volatility.
"This year, trading in the gold market has been particularly painful for both individuals and institutions," said a veteran bank trader. Despite over a decade of market experience, he said this level of drawdown and bull-bear battle in gold is unprecedented.
Market observers attribute the current gold price pullback primarily to instability in the Middle East. The recent gold price decline follows this pattern.
According to public information, late Thursday night Beijing time, news was confirmed that Yemen's Houthi rebels had attacked a Saudi oil tanker. This caused international oil prices to surge, with Brent crude futures breaking above the $100 per barrel mark for the first time since late May. Hours earlier, U.S. President Donald Trump escalated war threats against Iran, claiming he would "bomb and destroy" Iran's infrastructure for any attacks in the Strait of Hormuz. Iran responded in kind, promising retaliation.
Geopolitical conflicts typically enhance gold's safe-haven appeal, but the current market logic is different. Market concern is focused not on the conflict itself, but on the potential "stagflation" risk triggered by soaring energy prices. High oil prices are expected to exacerbate inflationary pressures, potentially forcing the Federal Reserve to maintain or even tighten monetary policy.
The market is not experiencing a one-sided trend, as the battle between bulls and bears remains intense. Wind data shows that long and short positions in spot gold have been alternating frequently since July, leading to sharp market fluctuations. For instance, on July 21st, the long position ratio in spot gold reached 79%, but by July 22nd, the short position ratio had rapidly surged to 77%. The results of these battles indicate that the $4,000 per ounce level has become a crucial battleground.
"Currently, the bulls are central banks continuing to buy gold, as well as buyers of gold ETFs and physical gold. The bears are speculative funds betting on major negative news, and individual investors and institutions selling ETF holdings to lock in profits at higher levels," explained Zhou Yiqin, a senior expert in financial regulation.
On the bullish side, central banks remain the primary force buying gold. According to data from the People's Bank of China, gold reserves increased by 480,000 ounces to 75.44 million ounces in June 2026, marking the 20th consecutive month of increases, with the single-month increment being the highest since October 2023. Furthermore, a survey by the World Gold Council indicates that central banks' optimism about gold as a future reserve asset continues to strengthen, along with an increased willingness to add to their gold reserves.
On the bearish side, some major institutions are beginning to short gold. According to reports, Bank of America analyst Paul Ciana recently stated that gold could remain under pressure during August and September. He added that prices might need to test support around $3,600 per ounce before finding a more solid bottom. He noted that the current gold correction "has only lasted 24 weeks, whereas the previous uptrend lasted 121 weeks," suggesting the correction duration is "significantly shorter relative to the prior uptrend."
Currently, Citigroup and Fitch have also joined the bearish camp on gold.
Is the Recent Price Volatility a 'Golden Opportunity' or a 'Signal to Exit'?
Looking ahead, with multiple factors intertwined, the risk of investing in gold continues to rise, and market views on gold's price trajectory are sharply divided. Is the current price level a 'golden pit' for buying or a 'run-away point' for selling?
From the perspective of current institutions, the bearish camp believes the adjustment in gold is far from over and a bottom is not in sight in the short term. Some institutions argue that ongoing disruptions from the US-Iran conflict and the Fed's hawkish stance will continue to limit the rebound space for precious metals, and further observation is needed to see if international gold prices can hold key levels. Conversely, the bullish camp believes the long-term logic for gold price growth remains unchanged and the structural bull market is still intact. Some institutions remain optimistic about the long-term market.
The Chief Investment Office of UBS Wealth Management believes the gold market is still digesting the hawkish signals from Fed Chairman Warsh and the bond market's expectations for higher US policy rates. If US economic activity surprises to the upside and employment data indicates a tightening labor market, coupled with further oil price increases, gold's near-term outlook may face challenges, and prices could come under renewed downward pressure.
"What the gold market truly needs now is stronger investment demand," UBS stated. In the short term, the market appears to be in a stalemate. However, short-term price weakness is not a reason to abandon gold, as the longer-term narrative remains clear and supportive. From a diversification perspective, UBS remains constructive on gold, especially for investors who favor real assets and have a multi-generational perspective.
Zhou Yiqin believes that in the short term, the bull-bear battle will remain fierce, making a one-way rally difficult. However, over the medium to long term, continued gold purchases by global central banks and geopolitical uncertainties should provide a floor for prices.
"The current adjustment is not yet sufficient, so investors should not blindly buy the dip," Zhou cautioned. He suggested that investors could use financial instruments like gold accumulation plans or gold ETFs for regular investments to average down costs. He specifically warned that non-professional investors should stay away from leveraged gold financial products and should absolutely avoid short-term speculative chasing of trends or panic selling.
(Disclaimer: The content and data in this article are for reference only and do not constitute investment advice.)
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