Gold falls below $4,000, but Asian buying surges! Institutions: The global gold market's "eastward shift" trend accelerates

Despite the recent weakness in gold and silver, German precious metals group Heraeus believes that the short-term pressure on the precious metals market is mainly due to the strengthening dollar and rising expectations for a Federal Reserve rate hike. As oil prices retreat and inflation cools, gold and silver are expected to regain support. Meanwhile, the surge in China's gold imports and Hong Kong’s accelerated efforts to build an international gold clearing hub also indicate that the global gold market focus is shifting toward Asia.

Stronger Dollar Pushes Gold Below $4,000

Heraeus analysts pointed out in their latest report that gold fell below $4,000/oz last week for the first time since November 2025, mainly because the market is betting further on the Federal Reserve maintaining a hawkish stance.

Currently, the probability of a rate hike at the Federal Reserve meeting on July 29 is about 35%, significantly higher than the less than 10% before last week’s meeting.

(Image source: SFA(Oxford), CME Group)

Driven by rate hike expectations, the US Dollar Index (DXY) rose above 101.5, hitting its highest level since May 2025. In contrast, during the precious metal rally earlier this year, the US Dollar Index briefly dropped to a 52-week low near 95.5.

(Image source: SFA(Oxford), Bloomberg Finance LP)

Heraeus noted that while a rising dollar does not necessarily mean that gold will inevitably fall, both are typically driven by the same macro factors. A stronger dollar not only suggests higher US interest rate expectations, but also raises the cost of gold for non-dollar buyers, thereby suppressing international gold demand.

As of Monday, spot gold was reported at around $4,035/oz, with the day's drop about 1.3%.

China’s Gold Imports Hit Two-Year High

Despite international gold prices fluctuating at high levels, China’s gold imports have clearly accelerated.

Data show that in May this year, China imported 162.6 tons of gold, up 63% from 99.5 tons in the same period last year, reaching the highest level in two years. In the first five months of this year, China’s cumulative imports of non-monetary gold reached 691.6 tons, a year-on-year increase of 76%. Although still lower than the 840.6 tons imported in the same period in 2024, the figure is significantly higher than last year’s level.

(Image source: SFA(Oxford), Bloomberg Finance LP)

Heraeus points out that this is mainly driven by strong demand for physical gold bars and the ongoing popularity of gold accumulation plans, with more and more individual investors allocating gold through fixed monthly investments.

However, high gold prices have also started to impact jewelry consumption. Data show that in May, China’s wholesale gold demand fell 36% year-on-year, the lowest level for the same period since 2010. Many jewelers have postponed restocking due to high gold prices.

Hong Kong Accelerates Efforts to Build Asia Gold Clearing Hub

In addition to the continued growth in mainland China demand, Hong Kong is also actively enhancing its status as a global gold trading hub.

Heraeus stated that ahead of the official launch of Hong Kong’s gold clearing system in July, at least four participating banks have already begun importing 400-ounce London good delivery gold bars in advance.

Analysts believe this move not only reflects Hong Kong’s desire to strengthen its role as a regional gold trading center, but also highlights the growing importance of Asia in the global gold market.

It is noteworthy that Singapore also plans to launch its own gold clearing mechanism later this year.

At the same time, the Hong Kong SAR government proposed in May this year to increase gold warehousing capacity to over 2,000 tons within the next three years and encourage the Hong Kong Airport Authority and financial institutions to expand gold storage facilities to prepare for future gold market expansion.

Oil Price Decline Could Be the Next Catalyst for Gold’s Rise

Although gold is under pressure from the dollar in the short term, Heraeus believes more important variables are changing.

With the easing of US-Iran tensions, international oil prices have basically fallen back to pre-war levels. Brent crude oil is now trading below $75/barrel, after having long remained above $100 during the conflict.

Analysts noted that if the Strait of Hormuz remains open, continued declines in oil prices will gradually be transmitted to businesses and consumers, pushing PCE and other inflation indicators lower.

Once US inflation cools again, the necessity for further Federal Reserve rate increases will diminish significantly, boosting the investment value of precious metals.

The report states: “If PCE and other inflation indicators continue to fall, the probability of a rate hike will drop, further reinforcing the investment logic for gold and silver.”

Silver Breaks Key Support Level

Silver has also been affected by hawkish expectations recently. Heraeus points out that spot silver has fallen below $60/oz for the first time since December 2025 and also broken through the important technical support level of $61.

Currently, spot silver is quoted near $58.19, with a daily decline of about 1.7%.

However, as oil prices decline, inflation expectations cool, and rate expectations improve, analysts expect gold and silver to regain favor from investors after a short-term adjustment.

Overall, Heraeus believes the precious metals market is currently facing a "short-term pressure, long-term optimism" scenario: the strong dollar and rate hike expectations continue to weigh on prices, but the growing physical gold demand in Asia and the eastward shift of global gold trading are providing new long-term support for the gold and silver markets.