Investors who were queuing up to buy gold at the start of the year are now mostly reluctant to check their account balances.

Gold, traditionally seen as a "safe-haven" asset, has experienced a rapid decline in this cycle, catching many off guard before they could decide whether to take profits, cut losses, or hold on, as prices have already slid significantly from their peaks.

The rapid ascent has been matched by a swift descent. As of June 11, 2026, COMEX gold, after reaching a high of $5,626.8 per ounce in late January, had fallen to as low as $4,046.2, representing a pullback of approximately 28%.

Domestic gold prices in China have followed the weakening trend. Data from the Shanghai Gold Exchange shows that on June 11, the domestic gold price closed at 896 yuan per gram, falling below the 900 yuan per gram level.

As gold prices continue to soften, the year-to-date returns for all gold-themed funds have turned negative. Concurrently, some capital has chosen to exit the market.

Data shows that as of June 11, 2026, the total assets under management for 20 gold-related ETFs stood at approximately 273.7 billion yuan. These products have seen a cumulative net inflow of 54 billion yuan this year, with the majority of that capital entering during the relatively high prices in January. However, funds have begun to withdraw over the past two months, with a net outflow of 14.15 billion yuan since May.

This indicates that the scale of capital inflow at the beginning of the year was substantial, while the pace of withdrawal has noticeably accelerated recently.

Breaking it down by type, ETFs tracking gold 9999 and Shanghai gold have an average year-to-date return of around -8%, with an average maximum drawdown of about -28%. These types are closer to what ordinary investors understand as "gold ETFs," primarily tracking the spot gold price.

Gold equity ETFs have fared worse. Six ETFs tracking the SSH Gold Stock Index have an average year-to-date return of approximately -17%, with an average maximum drawdown exceeding -45%.

Gold equity ETFs invest in stocks of listed companies within the gold industry chain. Therefore, they are influenced not only by gold prices but also by stock market sentiment, corporate earnings, and valuation changes.

When gold prices rise, gold stocks may exhibit greater elasticity; however, when gold prices correct and market risk appetite declines, gold stocks can also fall more sharply.

Reasons for the Sudden Shift in Sentiment

This round of decline is not attributable to a single factor. The most direct factor is the heightened expectations for the Federal Reserve to raise interest rates. The latest data shows that U.S. non-farm payrolls for May far exceeded expectations, casting a shadow of rate hike expectations over the entire market.

Gold does not pay interest. When U.S. Treasury yields and the U.S. dollar strengthen, the opportunity cost of holding gold increases, leading capital to naturally opt for a tactical retreat.

Another significant factor is the excessively rapid price increase in the earlier phase. Data indicates that from the beginning of 2024 to the end of January this year, COMEX gold had accumulated a gain of up to 133%.

In January of this year, gold assets were rising smoothly, and market expectations were highly aligned. However, the more uniform a trade becomes, the more vulnerable it is to a shift in sentiment.

A large number of profitable long positions, when faced with unfavorable macro data and gold prices breaking below technical support levels, can easily trigger automated systems to execute profit-taking and stop-loss orders, creating a negative cycle of selling as prices fall.

Furthermore, countries like Turkey, in response to domestic energy crises and exchange rate pressures, engaged in tactical sales during the first quarter of this year to secure U.S. dollar liquidity, exacerbating short-term supply pressures.

Decline Does Not Equate to a Broken Thesis

While this gold correction is deep, it is not advisable to simply interpret it as a "complete collapse."

Firstly, central bank gold purchases, exemplified by the People's Bank of China, are continuing. As of the end of May 2026, China's gold reserves stood at 74.96 million ounces, an increase of 320,000 ounces from the end of April, marking the 19th consecutive month of additions.

A report released by the European Central Bank in June also mentioned that as of the end of 2025, gold's share in global official reserves had risen to 27%, surpassing U.S. Treasury securities to become the largest asset in global official reserves.

Secondly, the trend of de-dollarization and U.S. debt risks persist. Currently, U.S. federal debt continues to climb, with a heavy interest burden. As an asset independent of any single country's credit, gold's strategic position remains solid.

In the short term, if geopolitical tensions substantively ease, gold's safe-haven premium may decline. However, if international oil prices subsequently retreat, easing inflationary pressures, it could also create room for the Federal Reserve to pivot towards interest rate cuts in the future, thereby alleviating the pressure from real interest rates on gold.

Overall, the long-term allocation rationale for gold remains intact: hedging against currency credibility, geopolitical risks, and portfolio volatility. However, it has never been a low-volatility asset, nor is it an asset that only goes up.

Historical data shows that during the previous two major gold bull markets, there were also significant corrections of varying degrees, with maximum intra-cycle drawdowns exceeding 30%. The current cycle's drawdown so far is close to 30%.

The market action over the past few months also serves as a reminder to investors that while gold can provide a hedge, buying during overheated phases can similarly lead to significant drawdowns.

For those who are not invested or have asset allocation needs, although the current gold pullback is already quite deep, market turning points are difficult to predict precisely. It is not advisable to go all-in at once trying to time the bottom.

Going forward, the Federal Reserve's interest rate decision on June 17 and subsequent U.S. data may still cause volatility in gold prices. Compared to chasing the absolute lowest price point, a strategy of buying in batches on dips might be more suitable.