Investors in the gold market find themselves in a dilemma as prices have fallen sharply. While the drop has ignited thoughts of buying the dip among retail investors who have been waiting for a chance to enter the market, there is also widespread concern that prices may decline further.

On June 10, 2026, COMEX gold futures fell below $4,200 per ounce, closing at $4,094.1. This represents a decline of over 24% from the all-time high of $5,626.8 per ounce reached at the end of January and has completely erased this year's gains, bringing prices back to levels seen around early November 2025.

Consequently, domestic prices for gold jewelry and investment-grade gold bars have fallen below 1,300 yuan per gram and 1,000 yuan per gram, respectively. Both categories are down approximately 25% from their historical peaks at the end of January.

Retail Investors' Dilemma

For years, Xu Yan has consistently bought investment-grade gold bars on price dips. Thanks to the significant rally in recent years, this strategy has yielded substantial profits, with unrealized gains exceeding 70,000 yuan. With gold prices now at a roughly 25% discount from their highs, she is tempted to buy more.

However, when she recently shared this idea of buying the dip with friends, she was met with opposition. A friend judged that gold prices might fall below $4,000 per ounce, suggesting that entering the market now would be like "buying halfway down the mountain."

This has left Xu Yan hesitant—should she make a move or wait and see?

Tang Longfeng faces a similar quandary. With seven years of gold investment experience and currently working as a futures trader at a domestic private fund, he senses an oversold investment opportunity in gold. In his view, sustained central bank buying, escalating geopolitical risks, and high oil prices will eventually reawaken gold's safe-haven and inflation-hedge attributes, leading to a price rebound.

Yet, his fund's risk control department has strongly opposed his proposed trades. Their reasoning is that high oil prices are fueling expectations of Federal Reserve interest rate hikes, which is eroding global capital's confidence in gold investments.

The Global Capital Divide

Looking at the global market, capital flows reveal significant divergence. The latest data from the World Gold Council shows that global gold ETFs saw net outflows of approximately $1.8 billion in May, reversing the net inflow trend of the previous five months. This indicates that global capital is starting to vote with its feet against gold.

Zhang Gang, a Wall Street multi-strategy hedge fund manager with over a decade of experience in COMEX gold futures, is closely watching this new round of intense capital competition.

Data from the U.S. Commodity Futures Trading Commission shows that for the week ending June 2, Wall Street investment banks, betting on a near-term Fed rate hike, significantly reduced their net long positions in COMEX gold futures and options by 1,955,400 ounces. In a countermove, Wall Street hedge funds increased their net long positions by 1,440,900 ounces during the same week.

"Wall Street hedge funds collectively hold over ten million ounces of net long positions in COMEX gold futures and options. They absolutely cannot allow investment banks to recklessly short-sell and suppress the gold price, causing them to suffer massive losses on their gold holdings," Zhang Gang stated bluntly. Who will have the last laugh in this fierce contest remains unknown.

Investors Await the "Bottom"

On the morning of June 10, Zhao Lin messaged over a dozen regular customers, inviting them to his gold stores to purchase jewelry and bars.

Three years ago, he invested in opening three gold stores in Shanghai's Xuhui and Huangpu districts, hoping to make his "first pot of gold" by riding the wave of rising prices.

As gold prices fell and erased the year's gains, he believed his regular customers' investment enthusiasm would be reignited.

However, only four regular customers visited his stores that day, and two of them were just browsing without buying.

One regular customer told Zhao Lin he was afraid of "buying halfway down the mountain." He had recently seen several gold research reports indicating that gold had entered a technical bear market and would likely fall below $4,000 per ounce in the short term.

A technical bear market is typically defined by two criteria: a cumulative price decline exceeding 20% over a period, and the price effectively breaking below the 200-day and 250-day moving averages. Currently, gold prices have fallen about 25% over the past four months, have broken below the 200-day moving average, and the support level of the 250-day moving average is precarious. This largely fits the characteristics of a technical bear market.

Under these circumstances, many investors are waiting for gold to hit its "lowest point" before acting.

Xu Yan had planned to buy investment gold bars once the price fell below $4,000 per ounce. But after hearing that gold might fall further toward $3,800, she hesitated again.

Zhao Lin, however, feels he "can't afford to wait."

When gold prices plunged in March, he anticipated a wave of investor buying and spent over a million yuan to stock up on jewelry and bars. Now, only about 30% of that inventory has been sold. Sales are highly polarized by weight: while 5-gram and 10-gram small bars and 1-3 gram small jewelry pieces are selling well, 30-gram and 50-gram bars and heavier jewelry are almost unsold.

This has put significant cash flow pressure on Zhao Lin.

In an effort to recoup funds quickly, on June 11, he offered some regular customers an additional discount of 10 yuan per gram on heavier jewelry and bars over 30 grams. However, most customers remained unmoved, preferring to wait for the price to fall to its "lowest point."

Whether that lowest point is $4,000, $3,800, or $3,600 per ounce, they themselves are unsure.

Liu Lei, a client manager in the precious metals department of a joint-stock bank, has also felt the shift in customer attitudes due to the price change. In April, some clients inquired about the availability of investment bars over 30 grams. Now, such inquiries are rare.

On June 10, he promoted new 50-gram investment bars to over ten clients, but their responses were mostly questions like, "How much longer will gold keep falling?" and "Will gold only stabilize after falling below $4,000 per ounce?"

This made him realize that the psychology of "buying the rally, not the dip" is influencing many clients' investment decisions.

Headwinds for "Gold-Plus" Product Launches

Faced with the falling gold prices that have wiped out the year's gains, Ms. Li considered buying the dip.

Ms. Li is a product manager at the wealth management subsidiary of a joint-stock bank. She considered allocating 5% to 8% of the assets from three of the company's "fixed-income-plus" products into gold ETFs, or a combination of the Shanghai Gold Exchange's Au9999 product and over-the-counter call options on gold.

Ms. Li believes that while rising Fed rate hike expectations are putting temporary pressure on gold prices, in the long run, escalating geopolitical risks from the U.S.-Israel-Iran conflict and high oil prices will ultimately reawaken gold's safe-haven and inflation-hedge attributes, putting gold back on an upward trajectory.

Furthermore, with increased volatility in stock and bond markets, increasing gold holdings could help cushion the decline in the net asset value of these wealth management products' equity and bond portfolios.

However, this idea met resistance before it could be implemented.

On June 9, her wealth management subsidiary held an internal meeting to discuss this proposal to increase gold exposure. The risk control department quickly moved to oppose it. Their argument was that with high Fed rate hike expectations, the probability of gold prices falling is greater than the probability of them rising. Increasing gold holdings would only drag down the net asset value of the three "fixed-income-plus" products and could even lead to larger-than-expected drawdown risks.

To persuade senior management to vote against the proposal, the risk control department provided a simulation estimate. If 5% to 8% of the assets from the three products were all used to buy gold ETFs, a drop in gold prices below $4,000 per ounce would cause an additional 0.2 to 0.25 percentage point decline in the products' net asset value. The overall yield would drop by 8 basis points to 1.65%, falling below the products' expected return rate. "The company leadership was genuinely scared," Ms. Li said. They immediately decided in the internal meeting to postpone increasing gold holdings.

An investment manager at a city commercial bank's wealth management subsidiary was not surprised by Ms. Li's experience. Since the third quarter of last year, he has been managing a "gold-plus" wealth management product. As gold prices have continued to fall since February, the gold asset allocation in this product has dropped from 30% at the end of last year to less than 10% currently. "We joke internally that this 'gold-plus' product is misnamed," he said. During this period, he tried to persuade the company's leadership to maintain a 20% gold allocation for the product and hedge the price volatility risk of the gold holdings by selling OTC gold call options. However, the leadership quickly rejected this suggestion. The reason was that starting in the second quarter, the parent bank had been continuously raising the margin requirements for its agency personal precious metals deferred business to mitigate gold price volatility risk. Therefore, the wealth management subsidiary also needed to be proactive and further reduce the gold asset allocation in this "gold-plus" product.

To his relief, the product has not yet faced significant redemption pressure and has maintained an asset size of around 300 million yuan year-to-date. This is thanks to its average gold entry cost being around $4,000 per ounce, which has preserved some unrealized gains, keeping the product's net asset value around 1.03 yuan.

Based on this investment performance, he attempted in mid-May to persuade the leadership to launch a new series of the "gold-plus" product. However, at the product operations meeting at the end of May, the proposal was rejected. The channel department reported that the current gold price decline had not sparked a gold investment fever, making it difficult for a new "gold-plus" product to gain investor favor.

Through communication with product managers at several wealth management subsidiaries, this investment manager learned that most subsidiaries have recently become more cautious about developing "gold-plus" products. "Perhaps this situation will only completely reverse when gold prices return to the sharp upward trend seen during the 2022-2024 period," he said.

Zhao Jian, President of the Xijing Research Institute, believes that core drivers such as global monetary system transformation, ongoing geopolitical risks, and central bank gold-buying support are still gathering momentum, laying the groundwork for a gold price rebound in the second half of the year. However, unless expectations for a U.S. interest rate hike significantly weaken and the AI/silicon-based industry experiences a major shift that benefits other sectors, it will be quite difficult for gold to replicate the strong upward momentum of previous years.

Lack of Institutional Consensus

Facing gold prices below $4,200 per ounce, Tang Longfeng feels an indescribable sense of regret.

At the end of February, following the outbreak of the U.S.-Israel-Iran conflict, Tang Longfeng believed this would reawaken gold's safe-haven and inflation-hedge attributes. He quickly used the overseas investment account of his private fund to spend $400,000 buying long positions in COMEX gold futures.

However, since March, gold prices have fallen instead of rising, dropping from around $5,300 to near $4,400 per ounce at one point. He was forced to cut his losses and exit during the week of March 20, resulting in a loss of over 20% of his investment principal. This became the largest single loss in the overseas portfolio he manages this year. In early April, he submitted a "reflection report" to the fund's investment committee, deeply reviewing his own impulsiveness and recklessness.

Facing this investment loss, Tang Longfeng has been reflecting—why did gold suddenly lose its safe-haven and inflation-hedge attributes in the face of war and high oil prices?

Initially, he thought he had overlooked the "anomalous actions" of several central banks in March—when central banks like Turkey's suddenly sold gold reserves to raise U.S. dollars to pay for expensive crude oil imports. This action removed the "central bank buying support" for gold, leading to a sharp decline.

But he soon realized this explanation was "untenable." Global central banks reversed their selling in March and became net buyers of about 17 tons of gold in April, yet this still did not stop the downtrend.

He noted a Citigroup report released on June 8, which stated that due to high energy prices fueling market expectations of a Fed rate hike within the year, the target price for London spot gold over the next three months would fall from $4,300 to $4,000 per ounce. If the blockade of the Strait of Hormuz persists until late summer, the price could drop to $3,500 per ounce.

In the view of Kuang Zheng, Chief Investment Officer for China at HSBC Private Banking and Wealth Management, the recent gold price decline has two visible drivers: the temporary failure of gold's risk-hedging attribute and profit-taking by existing holders. But behind this, a new investment logic is profoundly affecting financial markets: high oil prices leading to rising Fed rate hike expectations and a rebound in real U.S. interest rates are bound to drag gold prices lower. Kuang Zheng believes that global central banks resuming gold purchases have been powerless to stop the price decline because the financial markets' attention is focused on how high oil prices are continuously fueling Fed rate hike expectations, overturning previous market expectations of Fed rate cuts.

In early June, pricing in the U.S. Federal Funds Rate futures market showed traders assigning about a 60% probability to a Fed rate hike in October. Many Wall Street investment institution traders also believed that if there was no hike in October, the Fed would raise rates by 25 basis points in December. Once the Fed pulls the trigger on a hike, the real U.S. interest rate (nominal rate minus inflation) will rise accordingly, inevitably dragging gold prices lower.

Zhang Gang has also sensed the "peculiar" gold investment atmosphere on Wall Street created by rising Fed hike expectations.

In early June, he attended a Wall Street asset management salon in New York. He found that several family office managers and asset allocation directors from asset management institutions in attendance deliberately avoided the topic of buying the dip in gold.

But back in March and April, these same people would get straight to the point when meeting peers: the fundamentals supporting higher gold prices haven't changed, so it's time to consider buying gold assets on dips.

Zhang Gang is glad he didn't follow their advice.

Currently, the gold allocation in the two multi-strategy fund products he manages is less than 5%, down 10 percentage points from the beginning of the year. Therefore, the drag on these funds' net asset value from the gold price decline over the past few months has been only 0.15 percentage points.

Behind this is Zhang Gang's choice to "side with" Wall Street investment banks, betting that rising Fed hike expectations and a rebound in real U.S. interest rates will continue to pressure gold prices.

For now, Tang Longfeng is also in no hurry to enter the market to "stage a performance comeback."

Having learned a lesson from his investment failure in March, he has been communicating daily since late May with friends at Wall Street investment institutions to understand the latest shifts in their gold investment logic. "As long as they are still discussing Fed rate hike expectations, rushing in to bet on a gold price rebound may not be appropriate," he said. In his view, only when Wall Street investment institutions shift their focus back to gold's inflation-hedge and safe-haven attributes will buying gold on expectations of a rise present a real opportunity.