Gold has plummeted nearly 30% in five months — keep an eye on these five major signals after the breakdown

　　

At the start of 2026, spot gold surged to a historical peak of $5,598 but then pulled back nearly 29% in the following six months, breaking below the key $4,000 level last week. After this breakdown, market consensus between bulls and bears collapsed, with Wall Street investment banks' target prices ranging from as low as $3,440 to as high as $6,300—a span of nearly $3,000.

Analysts indicate that, during this period of unprecedented divergence among institutions, making a one-sided bet on a single price level is rarely reliable amidst market volatility. A more dependable approach is to focus on the core signals within the gold pricing system—judging the market rhythm by verifying indicators rather than guessing directions.

Drawing on the latest research reports from leading domestic and international institutions, as well as expert opinions, Jiemian News has summarized the most valuable observation signals for the gold market from the perspectives of policy pricing, liquidity sentiment, physical support, and technical patterns. For investors, relying on a single signal is insufficient to determine a turning point—only a combination of multiple signals offers a high-probability trading opportunity.

Triple Bearish Factors in Sync: The Underlying Logic Behind the Drop Below 4,000

Analysts overwhelmingly agree that this breakdown was not a black swan event, but an inevitable result of the sustained interplay of three factors: interest rates, the US dollar, and geopolitics. These were the core narratives driving gold upward, all of which have reversed in just half a year.

　　

Throughout 2025, markets widely expected the Federal Reserve to begin a rate cut cycle in 2026, supporting gold’s rally to $5,598. However, this narrative was shattered by the Fed’s most recent policy meeting this month.

On June 17–18 (East Eight Zone), under new Chairman Kevin Walsh, the Federal Open Market Committee (FOMC) unanimously voted 12-0 to keep rates unchanged. The subsequent dot plot revealed that, of the 18 officials providing forecasts, 9 expect at least one rate hike in 2026, just 8 expect rates to remain steady, and only 1 foresees room for a cut this year. Back in March, no one expected a hike in 2026 and 7 anticipated a cut. The latest dots pushed the expected median policy rate at end-2026 up sharply from 3.4% in March to 3.8%. In the post-meeting press conference, Walsh stated directly that “there is still work to do on price stability.” According to CME FedWatch, after the meeting the probability of a rate hike in September surged from 29% a week earlier to 68%.

ING’s commodities strategy team stated bluntly in their report: “Gold’s sustained weakness shows the market’s core focus has shifted from risk aversion to the effects of high rates and tight financial conditions.”

　　

The shift in rate expectations has powered the dollar higher. On June 24, the dollar index intraday reached 101.8, its highest since April 2025. As the currency in which gold is priced, the stronger dollar means gold gets increasingly expensive for non-US currency holders. As of early trading June 30, the dollar index remained above 101.

This directly suppressed physical demand. In traditional gold consuming countries such as India and Turkey, ongoing currency devaluation coupled with already elevated local gold prices fueled consumer caution. Furthermore, Q2 is already a seasonal low for consumption, so the absence of physical buying removed support for prices.

The classic “double whammy” of rising rates and a stronger dollar hit gold simultaneously, leaving almost no fundamental support for a rebound.

　　

While rates and the dollar form the fundamental anchors, the easing of tensions with Iran eliminated gold’s last risk-hedge cushion. With the US-Iran peace framework advancing, shipping through the Strait of Hormuz normalized, and oil prices fell to four-month lows—wiping out this segment of geopolitical premium.

After the Breakdown: Five Core Signals to Watch Closely

After gold broke below $4,000, the market’s main focus shifted to: Where is the bottom? When will a reversal occur?

According to analysts interviewed by Jiemian News, there is no fixed answer, but the changing balance of bulls and bears can be tracked through five core signals to catch the market’s turning point.

　　

Independent economist Liu Weiming told Jiemian News, “The direction of Federal Reserve policy is the number one variable dictating the medium-term trajectory of gold, as well as the root cause of the bull-bear divergence. The bears argue high rates will persist all year, while the bulls believe the market has already priced in too much hawkishness.”

Goldman Sachs, which gained prominence in 2025 for its precise bullish calls on gold, has been continuously lowering its target price. In its June report, it made clear that persistent US supply-side inflation will endure through Q3 and rate cuts are nowhere in sight this year. Its economists have pushed the window for cuts back to 2027. Based on this, Goldman cut its end-2026 gold target from $5,400/oz to $4,900/oz and warned that should the Fed hike later this year, gold prices could slide further to $4,400/oz.

In contrast, top bull camp member CICC believes the current market has overdone pricing in Fed hawkishness. CICC argues US inflation may already have peaked and could enter a downward path in the second half. Walsh’s debut should not be read as the Fed turning permanently hawkish; the current stance may be reserving room for a future policy pivot back to easing. Hence, this gold correction does not mark the end of the bull market, and a turnaround may be near.

　　

If macro data acts as a slow variable, the 10-year US Treasury yield and the dollar index are the real-time pricing anchors, weighting most in institutional quant models.

Deutsche Bank is a prime bear on this front. Its report on cutting gold’s price target made clear: as the real yield on 10-year Treasuries rises, zero-yielding assets like gold face direct pressure. Under this logic, even if nominal gold prices remain historically high, their marginal appeal is fading. DB slashed its annual gold target from $6,000/oz to $4,800/oz—a $1,200 cut—and in extreme scenarios, if the Fed hikes 3–4 times this year, gold could fall to $3,800 by year end.

Wang Hetao of Changjiang Securities offered a “marginal repair” logic: once nominal Treasury yields break above 4.5% and stabilize, persistent rate hikes may no longer purely suppress gold but instead raise market concerns about US debt sustainability. Gold’s credit-hedge attribute would then emerge, offsetting some opportunity cost pressure.

Bank of America, though admitting gold is unlikely to reach its $6,000 target in the short term, still believes substantial US fiscal deficits and a lack of reform will back gold’s long-term uptrend.

An important underlying logic for bulls is the chronic issue of large US fiscal deficits and debt—the structural forces supporting gold’s long-term value won’t change simply due to a temporary Fed hawkish shift. They are currently sidelined by the interest rate cycle, ready to reemerge as core drivers once hot money exits and expectations reverse.

　　

Liquidity is the direct driver of prices, and the movement of institutional funds often forewarns market reversals. The immediate cause of gold’s accelerated decline this round has been large, sustained ETF outflows.

StanChart analyst Suki Cooper noted in a June 24 report a striking figure: at around $4,000, roughly 298 tons of gold ETF holdings are underwater. These “underwater positions” act as a structural ceiling on rebounds—each time gold rallies toward breakeven, some investors exit, adding fresh selling pressure.

World Gold Council data shows that in May this year, global gold ETFs saw a net outflow of 16 tons, with losses continuing into June. Although last week saw a net inflow of $1.1 billion (breaking a 4-week streak of outflows), it is trivial compared to the 298 tons underwater.

While Morgan Stanley remains positive on gold’s long-term outlook and retains its forecast that gold will rise to $5,200/oz in the second half of 2026, it believes one key condition is still unmet—ETF inflows must resume on a large scale.

Morgan Stanley's commodity strategists point out in their latest research that while central bank buying will continue to support the market, the real determinant of the next major rally remains investment demand, with ETF flows likely to continue being driven by the Fed policy outlook, real rates, and dollar trends.

　　

Central bank gold purchases and physical consumption form the underlying support for gold prices and serve as the bulls’ strongest long-term argument. After a deep correction, the degree of physical demand absorption directly determines how far prices may fall, underpinning the core of the bull case.

The World Gold Council’s June 16 “2026 Global Central Bank Gold Reserves Survey” found nearly 90% of reserve managers expect global central bank gold holdings to rise over the next 12 months; 45% of surveyed central banks plan to increase their own gold reserves—the broadest participation in the survey’s nine-year history. Reserve diversification amid de-dollarization is a long-term trend unlikely to reverse due to short-term price swings.

The European Central Bank's June report “The International Role of the Euro” confirmed a historic shift: gold has overtaken US Treasuries as the largest reserve asset held by global central banks—27% gold vs. 22% Treasuries—providing long-term bottom support for gold.

On the market side, though Morgan Stanley, Goldman Sachs, Citi, and other global investment banks have lowered their gold price targets for the second half of 2026, most agree that continued central bank buying provides a solid floor—some still maintain a bullish medium- to long-term outlook for gold.

　　

In breakdown markets, technical levels most intuitively reflect the power balance between bulls and bears and provide crucial references for short-term trades. The latest price forecasts from many institutions closely align with major technical support levels.

Technical charts are the most direct bear case. Finance Magnates’ chief analyst Damian Hermier’s technical analysis yielded an even gloomier target than the banks: $3,440. He believes $4,000 has completely transformed from support to major resistance, and unless gold can reclaim above $4,000, the bear market structure will not change.

Zhu Shanying, a macro researcher at CITIC Futures, commented to Jiemian News that the technical pattern has clearly broken down, a downward trend that will be hard to reverse quickly. She advised investors to stay cautious in the short term and wait for hawkish expectations to gradually recede toward the end of Q3 before positioning for a rebound.

Editor: Zhu Henan