Volatility has subsided, and the investment fervor is receding. Gold and silver spot contracts have seen a rare reduction in margin requirements and price fluctuation limits. On May 29, the Shanghai Gold Exchange (SGE) issued a notice after market close, announcing a reduction in both the margin ratio and the daily price limit for several gold and silver deferred contracts, effective from the clearing time after the close on June 1. Regarding gold prices, long and short funds have been engaged in a tug-of-war around $4400 per ounce in recent days. On May 28, COMEX gold futures once fell to $4365 per ounce, then surged sharply due to U.S. core PCE data for April coming in lower than expected. On May 29, it successively reclaimed the key levels of $4400 and $4500, currently quoted at $4536 per ounce. "A reduction in margin and price limits is not a signal to buy the dip, but rather a confirmation of receding volatility," a senior precious metals trader cautioned. Typically, such adjustments by exchanges often occur during a normalization recovery period after volatility has declined. Subsequently, the direction of gold prices depends more on the macroeconomic environment than on the exchange's actions themselves. The key lies not in what the exchange does, but in whether investors' own risk control capabilities match the increased leverage. Volatility has receded, marking the SGE's second "margin and limit reduction" this year. Specifically, the SGE lowered the margin ratio for several gold deferred contracts, including Au(T+D) and mAu(T+D), from 18% to 15%, while contracting the daily price fluctuation limit from 17% to 14%. For the Ag(T+D) contract, the margin ratio was reduced from 24% to 21%, and the daily price limit was narrowed from 23% to 20%. This is the second time the SGE has lowered margin requirements and contracted price limits since 2026. Previously, on February 24, the SGE had already reduced the margin for gold contracts from 21% to 18% and narrowed the daily price limit from 20% to 17%. Combined, these two rounds of adjustments have cumulatively lowered the margin for gold T+D by 6 percentage points from its peak at the beginning of the year, effectively increasing the actual leverage from approximately 4.8 times to about 6.7 times. Coincidentally, banks have also recently adjusted investment restrictions on gold-related businesses. Several banks, including Industrial and Commercial Bank of China, China Construction Bank, Industrial Bank, and China Merchants Bank, have collectively modified the trading thresholds for their gold accumulation businesses. These changes include lowering product risk ratings and extending night trading hours. Prior to this, banks had successively raised the risk levels and entry barriers for such products. However, in the futures market, the Shanghai Futures Exchange's gold futures have maintained high margin levels since adjusting the margin to 18%-19% and expanding the daily limit to 17% on February 9. Apart from special arrangements during the Spring Festival, where the daily price limit for gold was temporarily raised to 20% with a margin of 21%/22%, the post-holiday settings were restored. The aforementioned precious metals trader stated that institutions generally judge that the period of extreme market volatility has passed. The impact of geopolitical conflicts on gold prices has been largely digested by the market. The previous 17% daily price limit is considered relatively lenient for current conditions, and a 14% limit is sufficient to cover normal fluctuations. Furthermore, under an environment of high margins and substantial transaction fees, trading volume for gold T+D has significantly shrunk, and the number of new individual investor accounts has noticeably declined. As precious metal price volatility narrows, exchanges need to lower barriers to attract capital back and maintain trading activity. Simultaneously contracting the price limits is also a measure to prevent volatility from spiraling out of control following the increased leverage. Is the gold bull market ending? Institutions remain divided. Reviewing the gold price trend, gold has experienced a unilateral upward trend lasting over three and a half years. From 2023 to the present, the spot price of London gold has risen from around $1800 per ounce to a peak near $5600 per ounce, representing a gain of over 211%. Since 2026, gold prices have retreated from the high of $5500 per ounce, trading mostly within the $4700-$4500 range for much of May. The "cooling-down camp" believes the investment frenzy is receding. From 2023 to 2025, driven by three factors—central bank gold purchases, geopolitical safe-haven demand, and de-dollarization—gold continuously reached new historical highs. Now, the pace of central bank gold purchases has slowed, geopolitical conflicts have entered a stalemate phase, and the de-dollarization narrative is being suppressed by a strong U.S. dollar. Gold lacks new catalysts for further gains. CITIC Securities released a research report noting that gold, which was highly popular in 2025, has turned "quiet" in 2026 due to the U.S.-Iran conflict. While gold prices remain firm, they have significantly underperformed compared to assets like stocks, copper, and oil. The U.S.-Iran conflict stirred inflation expectations, leading to a retreat in liquidity-driven pricing, which was precisely the main driver behind the previous surge in gold prices. Wall Street institutions have also recently turned collectively bearish. Morgan Stanley, JPMorgan Chase, Goldman Sachs, UBS, and others have successively lowered their gold price targets, citing reasons such as the fading of safe-haven sentiment related to Middle East geopolitics and rising real interest rates. They argue that gold pricing has shifted from being driven by safe-haven demand back to a phase dominated by traditional macroeconomic factors like real interest rates. "The SGE's reduction in margin and price limits indicates that the most panicked period is over, not that the bull market has ended," a private fund manager opined. The key going forward, they believe, is to watch the timing of the Federal Reserve's policy shift and whether new black swan events emerge in geopolitical conflicts. A recent report from Moody's Ratings estimates that traffic through the Strait of Hormuz in 2026 will struggle to recover to pre-conflict levels, and a full restoration of oil supply might be delayed until after the first quarter of 2027. Brent crude oil is expected to fluctuate mainly within the $90-$110 per barrel range. This implies that inflation expectations and geopolitical safe-haven demand will not dissipate quickly. While gold may have a solid floor, breaking to new highs could also be difficult. Huatai Futures holds the view that rekindled U.S. inflation pressure further squeezes the Fed's room for interest rate cuts within the year. However, signs of improving market risk appetite are currently emerging, and it is expected that gold prices may exhibit a pattern of volatile but relatively strong performance in the near term. From a long-cycle perspective, Hengtai Futures points out that in the post-conflict era, traditional monetary and credit frameworks are facing obsolescence. Global distrust in the U.S. dollar is deepening, and the anchor for monetary pricing is shifting towards "hard assets." Therefore, this cycle for gold will not end here.