Gold prices are experiencing a sustained downward trend.
On June 23rd, the international gold market underwent a significant correction, with both spot and futures prices plummeting simultaneously. The domestic Chinese gold market followed suit, resulting in a synchronized weakening of both domestic and international markets.
As of the latest update, London Gold Spot was quoted at $4,098.451 per ounce, marking a sharp intraday decline of 1.97%. It touched a low of $4,090.5 per ounce during the session, breaking below the key $4,100 per ounce level and setting a new low since June 11th.
Taking a longer-term perspective, London Gold Spot has now completely erased its gains for the year. Compared to the historical high near $5,600 per ounce seen earlier this year, the cumulative decline has exceeded 25%.
The international futures market moved in tandem with the spot market, trending lower. At the latest update, COMEX Gold Futures were down 2.19% intraday, quoted at $4,110.7 per ounce, with a session low of $4,108.2 per ounce. The overall volatility pattern remained consistent with the spot market.
The domestic Chinese gold market also saw a substantial pullback, resonating with the international decline. As of the close on the afternoon of June 23rd, Shanghai Gold Exchange T+D fell sharply by 1.65% to 898.41 yuan per gram. The main gold futures contract on the Shanghai Futures Exchange dropped 2.04% to 897.9 yuan per gram. Both domestic spot and futures gold prices broke below the 900 yuan per gram psychological threshold.
Key Drivers Behind the Decline
Zhang Pengyuan, a wealth researcher at Paipaiwang, analyzed that this sustained weakness in gold prices is driven by multiple core factors. The simultaneous strengthening of US real bond yields and the US dollar has significantly increased the opportunity cost of holding gold. A temporary easing of global geopolitical conflicts has notably cooled market demand for safe-haven allocation. Additionally, the substantial rally in gold prices earlier led to a concentrated exit of long positions, creating selling pressure and accelerating the price decline.
Outlook for Future Price Movements
Regarding the future trend, Zhang Pengyuan believes the current high-interest-rate environment has not fundamentally changed. The US dollar and US bond yields will continue to suppress the upside potential for gold, with short-term prices likely to maintain a pattern of low-level consolidation and base-building. If subsequent US inflation data exceeds expectations again, prompting the Federal Reserve to intensify its tightening measures, gold prices could potentially test lower levels. However, the room for a sharp, deep decline is limited, as ongoing central bank gold purchases globally will provide strong support at the bottom.
In Zhang's view, the Federal Reserve's policy meeting in September is a crucial observation window. Only if the policy path shifts back towards easing expectations can gold potentially initiate a sustained upward trend; otherwise, prices may continue fluctuating within a range. From a medium to long-term perspective, the core logic supporting gold—including the weakening of US dollar credibility, the global trend of de-dollarization, and continuous gold accumulation by central banks worldwide—remains unchanged, preserving gold's long-term allocation value.
Perspective on the Recent Correction
"The recent significant pullback in gold prices from highs is more of an adjustment following the excessive gains earlier, not a sudden disappearance of gold's long-term logic," said Wang Zheng, General Manager of Shangyi Fund. He noted that gold prices surged to very high levels earlier this year, as the market fully priced in favorable factors such as interest rate cut expectations, safe-haven demand, and central bank purchases. Entering June, the Federal Reserve signaled a relatively hawkish stance, leading to a stronger US dollar and interest rate expectations, which increased the cost of holding gold. Coupled with a temporary easing of geopolitical risks and a retreat of short-term safe-haven buying, gold prices have entered a phase of re-adjustment to find a reasonable valuation.
Wang Zheng further pointed out that short-term gold prices will likely continue to move in a volatile pattern. The future trajectory will depend on three key variables: the Federal Reserve's monetary policy expectations, the strength of the US dollar index, and whether global geopolitical risks re-escalate. If expectations for Fed rate hikes strengthen further, gold will remain under pressure. However, if US economic data weakens, the dollar retreats, or safe-haven sentiment reignites, gold could see a recovery. In the medium to long term, the logic of central bank purchases and global asset allocation diversification remains intact, meaning gold still presents investment opportunities, albeit with significantly amplified price volatility.
Recommended Investment Approach
Regarding investment strategy, Wang Zheng stated that gold still holds value for asset allocation but is not suitable for short-term speculation and chasing rallies. For ordinary investors, gold is better suited as a defensive asset within a portfolio to hedge against currency depreciation, inflation, and geopolitical risks, rather than a vehicle for heavy directional bets. For specific operations: investors holding positions can retain a core position for the long term; those with overweight positions can use rebound opportunities to reduce holdings and lower portfolio volatility. Investors not yet exposed to gold are advised against entering the market with a full position at once; it is preferable to build positions gradually during price pullbacks. For investment and wealth preservation purposes, purchasing gold jewelry with high premiums is not recommended. Gold ETFs are a more suitable, standardized allocation tool for ordinary investors.
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