Gold prices have experienced a significant pullback. Wind data shows that on May 15, the international spot gold price, as represented by the London spot price, fell by 2.37% to close at $4,539.39 per ounce. This marked the fourth consecutive day of declines, with a weekly drop of 3.70% from May 11 to May 15, narrowing its year-to-date gain to 5.12%.
Domestic gold prices in China also faced pressure. On May 15, the Shanghai Gold Exchange's Au99.99 spot gold opened at 1,031.5 yuan per gram, touched a low of 1,000.05 yuan per gram during the session, and closed at 1,006.01 yuan per gram. Retail gold jewelry prices at domestic outlets generally declined. According to data from Jintou.com, the price of Chow Tai Fook gold jewelry was reported at 1,393 yuan per gram on May 16, falling below the 1,400 yuan per gram threshold.
What caused this sharp decline in gold prices? Yu Xiaoming, a senior investment advisor at Shaanxi Jufeng Investment, stated that the core factor is the unexpected resilience of U.S. economic data, which has led the market to scale back expectations for Federal Reserve interest rate cuts. This has resulted in a rise in U.S. Treasury real yields and a stronger U.S. dollar index, putting pressure on the valuation of non-yielding gold. Additionally, the substantial gains accumulated in gold prices earlier prompted profit-taking by long positions at high levels, coupled with a slight cooling of geopolitical risk aversion sentiment, collectively driving the rapid decline in gold prices.
Liu Siyuan, Chief Analyst at Lingshow Finance, also analyzed that the recent sharp pullback in gold prices is primarily driven by renewed market expectations for a more hawkish Federal Reserve. Following stronger-than-expected U.S. inflation data for April, several Fed officials have signaled a more hawkish stance, further delaying the anticipated timing of rate cuts. A stronger U.S. dollar has consequently weighed on gold prices.
As mentioned, the U.S. dollar index has shown a strengthening trend recently, rising by 1.19% from May 1 to May 15 and closing at 99.2668 points, approaching the key 100-point level.
"The sharp decline in gold prices this time is primarily due to the convergence of three negative factors: a reversal in Fed rate cut expectations, an increase in India's tariffs, and profit-taking at high levels," said Song Xiangqing, Vice Chairman of the China Society of Commercial Economics. Among these, India, the world's second-largest gold consumer, suddenly and significantly raised its import tariffs on gold, putting significant pressure on physical demand.
Public information shows that the Indian government issued an order on the 13th to raise the import duty on gold and silver from 6% to 15%. This move aims to curb overseas purchases and alleviate pressure on foreign exchange reserves. As a major global gold consumer, India's latest policy may not only affect local gold demand but also exert pressure on global gold prices.
Views on the future trajectory of gold prices have diverged. For instance, Goldman Sachs remains optimistic about gold and has reaffirmed its target price of $5,400 per ounce for the end of 2026. Goldman Sachs expects central bank gold purchases to recover and average around 60 tons per month during 2026.
Some institutions have adjusted their expectations for future gold prices. For example, Morgan Stanley significantly lowered its gold price forecast in early May, reducing its target price for the second half of 2026 to $5,200 per ounce, well below its previous forecast of $5,700 per ounce.
"In the short term, after the sharp decline, bearish momentum has been somewhat released. Gold prices are likely to enter a phase of range-bound consolidation, with price volatility potentially converging," Yu Xiaoming believes. "From a medium to long-term perspective, continued gold purchases by central banks providing a floor and persistent geopolitical uncertainties mean the value of holding gold remains. This round of adjustment may be a periodic correction."
Song Xiangqing stated that factors such as Fed policy expectations, the strength of the U.S. dollar, and the direction of geopolitics will dominate the short-term trend of gold prices. International gold prices are expected to find strong support around $4,500 per ounce, with resistance concentrated between $4,700 and $4,800 per ounce. The foundation for a long-term gold "bull market" remains unchanged, with a pattern of fluctuating upward movement likely remaining the main theme. Structural supports such as continued central bank gold buying, the trend of de-dollarization, and a widening supply-demand gap remain solid. Furthermore, the Fed's rate-cutting cycle will eventually begin, which is a long-term positive for gold prices to recover and challenge previous highs.
Liu Siyuan indicated that it is expected that international gold prices will fluctuate and consolidate repeatedly within the range of $4,350 to $4,650 per ounce over the next month. Domestic gold jewelry prices are expected to seek further support near 1,300 to 1,350 yuan per gram. In the long run, the value of holding gold as an asset allocation remains positive.
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