International gold prices have continued to weaken recently, falling more than 25% from the year's high and erasing the strong gains seen earlier in the year.

On June 10th, the downtrend persisted, with spot London gold and COMEX gold futures prices breaking below $4,100 per ounce, hitting their lowest levels in nearly six months. Spot London gold ended the day down 4.44% at $4,071 per ounce, a drop of over $1,500 from its yearly peak of $5,598.75. Year-to-date, the price of spot London gold has declined by more than 5%.

Currently, both international gold prices and domestic gold jewelry prices in China have retreated to levels last seen in late November 2025.

For domestic gold jewelry, on June 10, 2026, the price of branded pure gold jewelry fell below 1,300 yuan per gram, with a cumulative drop of over 400 yuan per gram for the year. Major brands like Chow Tai Fook, CHJ Jewellery, Lao Feng Xiang, and Lao Miao Gold quoted their pure gold jewelry at 1,276 yuan per gram.

Facing this deep correction exceeding 25%, the market's most pressing question is whether the decline represents an "overcorrection" in market sentiment or a fundamental reversal in the macroeconomic logic supporting gold.

Drivers of the Persistent Decline

Analysis from several institutions suggests this round of price weakness is not due to a single factor but rather the combined result of shifting macro policy expectations, geopolitical developments, and market fund flows.

Firstly, a much stronger-than-expected U.S. jobs report significantly boosted market expectations for interest rate hikes, creating temporary pressure on gold prices. Hua An Fund noted that the May U.S. non-farm payrolls report far exceeded market forecasts. The transmission path is: persistently strong employment → expectations for rate cuts essentially vanish → markets pivot to pricing in rate hikes → U.S. Treasury yields surge sharply → the opportunity cost of holding gold rises dramatically → gold prices tumble. Following the jobs report, data from the interest rate swaps market indicated traders have largely priced in the possibility of a 25 basis-point Fed rate hike by year-end, with the probability of a hike as early as October nearing 40%.

Secondly, geopolitical factors are indirectly pressuring gold by influencing oil prices and inflation expectations. Bo Shi Fund manager Wang Xiang analyzed that the direction of U.S.-Iran negotiations and the potential reopening of the Strait of Hormuz have been primary drivers of gold's performance recently. The impact of this factor on the scope for monetary easing, coupled with the elevated oil price environment which has shifted the range for U.S. inflation indicators, and the robust labor market, have essentially eliminated the possibility of monetary easing this year, making the U.S. dollar prone to strength. Concurrently, cash flows have tightened for both oil-exporting nations within the Gulf affected by infrastructure damage and for net oil-importing countries. Notably, these nations were among the largest marginal gold buyers outside of China and Russia, leading to an overall decline in central bank gold purchases.

Zheng Xin Futures stated in a research note that the current gold price decline is mainly influenced by three factors. First, the Federal Reserve's shift towards a more hawkish stance due to high inflation and resilient employment has pushed up real U.S. Treasury yields, dampening investment demand for the non-yielding asset gold. Second, while central bank gold buying remains stable overall, selling by some nations due to fiscal or exchange rate pressures has limited net purchasing power. Third, high gold prices combined with the seasonally weak second quarter for jewelry consumption have led to tepid demand in major consumer countries like China and India. The institution believes the dominant logic for gold prices has shifted from central bank buying to the path of interest rates and inflation, requiring a synchronized recovery in investment and consumer demand to support a return to an upward trajectory.

Furthermore, many market views point out that the rally in tech stocks, expansion in AI (Artificial Intelligence) capital expenditure, and enhanced market risk appetite may temporarily suppress gold. Global industrial precious metals trader Heraeus noted on June 4th that tech investment has been very active recently, with market optimism about AI prospects. This has led to a cooling in gold ETF (Exchange-Traded Fund) flows, which saw net buying of 800 tonnes for the full year last year. Since early March, global gold ETFs have seen cumulative net outflows of 45 tonnes, with the most significant net selling of 82 tonnes occurring in North America.

Market Divergence and Common Ground

Despite the recent clear pressure on gold prices, the market is not uniformly bearish on the future direction. Several institutions have analyzed potential paths for gold from different perspectives.

Heraeus believes that short-to-medium-term gold trends will still depend on interest rate hike expectations across major economies, with a key factor being whether oil prices remain elevated, potentially leading to a resurgence of inflation. However, the trader suggests that from a long-term perspective, if the trends of de-dollarization and global political-economic uncertainty risks are not reversed, gold still retains an upward logic. Heraeus expects gold prices to fluctuate within a range of $4,200 to $4,800 per ounce in the short term.

Zhan Dapeng, Director of Nonferrous Metals Research at Everbright Futures, analyzed that in the short term, market focus, besides U.S.-Iran negotiations, is centered on the Federal Reserve's June policy meeting. With the new Fed Chair presiding over the meeting for the first time, market attention is on the inclination towards rate hike expectations and the Chair's stance on monetary policy.

For gold, Zhan Dapeng reminds investors that the market is caught in a tug-of-war between "hawkish expectations dominating" and "geopolitical safe-haven demand providing a floor," leading to range-bound consolidation. Simultaneously, institutions continue to lower their gold price expectations for the first half of the year, watching for potential abnormal volatility around the Fed meeting driven by "buy the rumor, sell the fact" behavior.

Looking ahead, Wang Xiang recently stated that gold's one-month volatility has dropped from 40% in January to near 20% currently, which may attract renewed attention from medium-to-long-term funds. If the Strait of Hormuz enters an orderly reopening phase in the future, oil prices could retreat, potentially reversing the previously mentioned logic of liquidity tightening and supply-demand changes that were unfavorable for gold. Once the upward pressure on U.S. Treasury yields eases, the rapid rise in real interest rates is also expected to pause.

Hua An Fund pointed out that despite short-term pressure, structural bottom-supporting forces for gold still exist and are strengthening.

Firstly, China's central bank increased its gold purchasing pace again in May. Central bank data released on June 7th showed that as of the end of May, China's gold reserves stood at 74.96 million ounces (approximately 2,331.52 tonnes), an increase of 320,000 ounces (approx. 10 tonnes) from the previous month. This marks the largest single-month increase since last year and represents the 19th consecutive month of gold accumulation by the People's Bank of China.

Additionally, an official report from the European Central Bank (ECB) positively confirms the long-term logic for central bank gold buying. On June 2nd, the ECB released its "2026 Report on the International Role of the Euro," formally acknowledging that gold has surpassed U.S. Treasury securities to become the world's largest reserve asset. As of the end of 2025, gold's share of global official reserves rose to 27%, while the share of U.S. Treasuries declined from 25% to 22%. This shift in ranking was driven by valuation changes and structural gold purchases: gold prices nearly doubled over the 2024-2025 period, coupled with strategic allocations by global central banks averaging net purchases exceeding 1,000 tonnes annually over the past four years, elevating gold's reserve weight.

From a medium-to-long-term perspective, Hua An Fund believes the ECB report's confirmation that "gold has surpassed U.S. Treasuries as the world's largest reserve asset" reveals the structural shift occurring in the global reserve asset landscape. The PBOC's 19th consecutive month of accumulation, with purchasing intensity increasing month-on-month since March, indicates that strategic allocation at the central bank level continues to proceed steadily even amid short-term price pressure. While short-term gold prices may be suppressed by U.S. Treasury yields and rate hike expectations, the long-term logic for gold as a strategic asset hedging sovereign credit risk has not reversed, underpinned by structural support from global "de-dollarization" trends and systematic central bank buying.