The price of spot gold has fallen below the crucial $4,000 per ounce support level, sparking a debate among investors on whether to buy the dip or exit the market.

During late trading on June 24th, the international spot gold price breached the key $4,000 per ounce support. It briefly rebounded above this level on the morning of the 25th but subsequently declined again. At the time of writing, it was trading at $3,982.72 per ounce, equivalent to 870.96 yuan per gram, marking a new low for the year. Compared to the peak at the beginning of the year, the decline has reached 28.8%. Gold futures on the Shanghai Futures Exchange also weakened in tandem, falling below the 880 yuan per gram threshold.

Looking back to the start of the year, the gold investment market experienced unprecedented enthusiasm. International gold prices began a one-way upward trend from New Year's Day, reaching a high of $5,594.77 per ounce (approximately 1,225.3 yuan per gram) on January 29th, with a monthly gain of 29%. This rapid price surge fueled intense investment interest domestically, drawing ordinary investors towards gold accumulation plans, gold ETFs, and physical gold bars, while also triggering a buying frenzy for gold jewelry.

In just a few months, the market has reversed sharply, with gold prices successively losing the key support levels of $4,500, $4,200, and $4,000. High oil prices have intensified global inflation concerns, pressuring the Federal Reserve to maintain a tight monetary policy. Simultaneously, the artificial intelligence sector continues to attract market capital, with significant safe-haven funds flowing into risk assets like U.S. stocks. These factors are considered the core drivers behind this deep correction in gold prices.

On June 10th, the international gold price fell below its 200-day moving average, marking the first time in over two and a half years that gold has breached this level. In professional investment circles, the 200-day moving average is a significant trend filter. A sustained break below this line could lead to concentrated selling by trend-following funds, while potential new capital waiting for a trend stabilization may hold off, resulting in diminished buying interest. Some industry views suggest this signals the gold market's first entry into a technical bear market since 2022.

As gold prices continue to slide, several international investment banks have successively lowered their full-year gold price targets. Bank of Montreal has revised its average gold price forecast for the second half of the year down to $4,625 per ounce, a reduction of about 5% from its previous estimate. Deutsche Bank has set its Q3 target at $4,300 per ounce and its Q4 target at $4,800 per ounce, with a potential drop to $3,800 per ounce under certain interest rate hike scenarios, representing a maximum decline of 22%.

Prior to this, institutions including Goldman Sachs, Citigroup, JPMorgan Chase, Morgan Stanley, ANZ, and Commerzbank had already downgraded their gold outlooks. This collective bearish stance from institutions has further amplified market pessimism, triggering substantial redemptions from gold ETFs and programmatic stop-loss selling by futures long positions, accelerating the decline in gold prices.

Will spot gold continue to fall? Industry analysis suggests that following the breach of this key support level, short-term market selling pressure may intensify. This could involve forced liquidations of leveraged long positions and stop-loss selling by retail investors, potentially driving prices further down to the $3,800 to $3,900 range in the near term.

However, from a medium to long-term perspective, the fundamental rationale for holding gold as a strategic asset has not completely dissolved. The Federal Reserve's current stance is primarily to maintain high interest rates to curb inflation, not to initiate a cycle of consecutive, aggressive rate hikes. Concurrently, the global trend of central banks diversifying away from the U.S. dollar continues. According to a World Gold Council survey, nearly 90% of central banks plan to continue increasing their gold reserves over the next 12 months. This official physical buying is expected to provide solid support, establishing a floor for gold prices on the downside.