Over the past three months, gold prices have experienced significant volatility, with a decline exceeding 20% from their recent peak. This turbulent market, described by some investors as a "monkey market" rather than a bull market, has led to varied outcomes for those holding the precious metal.
For many investors who entered the market earlier this year, the experience has been challenging. Liu Ming, one such investor, began buying gold at the start of the year and has since seen prices retreat from their highs. Despite making additional purchases to lower his average cost, recent declines have resulted in substantial losses. "Today was the last time I added to my position. If it falls further, there's nothing more I can do," he remarked.
On May 28, COMEX gold futures briefly fell below $4,400 per ounce, dropping over 1% during the session before recovering slightly on May 29. Looking back, since early March, gold prices have corrected by more than 20% from their peak.
Wu Zewei, a special researcher, emphasized that gold should serve as a stabilizer in a personal investment portfolio rather than a short-term speculative tool. Its core value lies in hedging against volatility in other major asset classes and enhancing overall portfolio stability. He recommended that individual investors allocate between 5% and 15% of their total assets to gold, adjusting based on personal risk tolerance.
The recent surge in gold prices earlier this year led some investors to chase the rally aggressively. Zhang Fang, an investor from Guangdong, shared that he opened a gold accumulation account with a bank and invested 180,000 yuan, with an average purchase price above 1,100 yuan per gram, driven by widespread predictions of gold reaching $5,000 to $6,000 per ounce. "Watching gold rise daily, it's easy to fall into FOMO (fear of missing out)," he admitted. However, the market soon turned, and his account now shows a loss of over 30,000 yuan.
Similarly, some investors resorted to leverage. Li Qun disclosed that he borrowed over one million yuan to invest in gold, hoping to capitalize on the upward trend. Unfortunately, he entered just as prices began to correct. Despite subsequent purchases, bringing his total holdings to over 1,000 grams, he remains in the red by tens of thousands of yuan. "Once gold recovers a bit, I plan to sell some to repay the high-interest loan. This has been an expensive lesson," Li stated.
In response to gold's sharp fluctuations, several banks initially tightened regulations on gold accumulation products by raising minimum purchase thresholds and adjusting risk ratings to mitigate investor risks. Recently, however, some major banks have begun to ease these restrictions. For instance, China Construction Bank announced updates to its gold accumulation service documents, while Industrial and Commercial Bank of China adjusted its product risk rating. Additionally, China CITIC Bank is currently offering a promotional discount on accumulation plan fees.
The ongoing volatility in gold prices stems from a combination of factors, including macroeconomic policy expectations, capital flows, and geopolitical dynamics. Specifically, higher-than-expected U.S. inflation data has dampened hopes for interest rate cuts, maintaining a high-rate environment that pressures gold valuations. Meanwhile, elevated yields on U.S. Treasury bonds have drawn investment away from non-yielding assets like gold. Geopolitical tensions, which previously supported gold's safe-haven appeal, have also shown signs of easing.
A wealth manager at CITIC Bank noted that gold prices are likely to remain within a volatile range in the short term, advising against heavy positions. "Many clients are waiting on the sidelines for a more favorable entry point," they added.
This period of instability has tested investor psychology, leading to divergent strategies. One investor from Shanxi decided to liquidate over 80 grams of accumulated gold, incurring a loss of more than 15,000 yuan. "I finally feel relieved, no longer anxious about daily price fluctuations," they said. Conversely, Liu Ming, despite current paper losses, remains optimistic about gold's long-term prospects and plans to hold his position, awaiting a market recovery without further purchases for now.
Industry professionals maintain that the fundamental drivers of gold's long-term bullish trend remain intact, viewing the current adjustment as a temporary pause. The global shift away from the U.S. dollar, coupled with concerns over U.S. fiscal deficits and debt burdens, continues to undermine dollar credibility, enhancing gold's appeal as a non-sovereign, ultimate asset. "Ending gold's upward trend would require the U.S. to resolve issues of low inflation, low interest rates, and dollar hegemony—a challenge unlikely to be met soon," Wu Zewei commented.
For investors who bought at higher levels, Wu advised against excessive worry over short-term losses, suggesting that cost-averaging through regular investments could be beneficial. For those still considering entry, he recommended determining a suitable allocation ratio and adopting a phased investment approach, adjusting holdings based on market movements while adhering to core principles: avoiding leverage, refraining from chasing rallies, and not over-allocating to gold.
(The names Liu Ming, Zhang Fang, and Li Qun are pseudonyms.)