I. Core Reasons for the Recent Gold Price Drop (May 2026)

1. U.S. inflation exceeds expectations, reversal of rate cut expectations (most critical)

U.S. April CPI year-over-year 3.8%, PPI surged 6%, inflation persistence far exceeds expectations, market completely abandons the Fed's rate cut expectations for 2026, and even anticipates a slight rate hike.
U.S. long-term bond yields surged above 5%, the dollar index strengthened; gold is a non-interest-bearing asset, with opportunity costs soaring, institutional funds massively shifted from gold to U.S. bonds and dollar assets, putting heavy pressure on gold prices and causing a sharp decline.

2. Global physical demand sharply contracted

India (the world's second-largest gold jewelry consumer) raised gold import tariffs in May: from 6% to 15%, with a combined tax burden of nearly 18%, causing a collapse in gold imports, a steep decline in jewelry demand, and losing an important bottom support.

3. Profit-taking at high levels concentrated and technical breakdown

At the beginning of the year, gold prices soared to a record high of $5,598 per ounce, accumulating massive long-term profit positions; after breaking below the $4,500 key level, algorithmic stop-losses and leveraged liquidations triggered selling, accelerating the downward move.

4. Short-term liquidity squeeze, risk-avoidance logic invalidated

Middle Eastern conflicts pushed oil prices higher and intensified inflation expectations, paradoxically reinforcing the Fed's tightening logic; when the market faces short-term cash shortages, gold is sold first for liquidity due to its liquidity, temporarily losing its safe-haven attribute.

5. Some central banks sell gold in the short term

Some emerging central banks temporarily sold reserve gold to supplement dollar liquidity, increasing market selling pressure in the short term.

II. Future Price Trends (Short-term / Mid-term / Long-term)

Short-term (1–3 months, before Q3 2026): Volatile and weak, bottoming out

• Suppression: High interest rates and a strong dollar make a quick turnaround difficult in the short term, likely to fluctuate widely between $4,300–$4,800, with a bias toward weakness, and potential dips below $4,300;

• Support: Continued global central bank gold purchases (estimated 700–950 tons annually) provide deep support, making it difficult to break below the strong $4,000 level.

Mid-term (4–12 months, end of 2026 to early 2027): Rebound after rate cuts

Most probable baseline scenario: U.S. inflation gradually declines, economic slowdown, Fed resumes rate cuts in Q4, U.S. bond yields fall, dollar weakens, gold prices rebound, with mainstream institutions targeting around $5,200 by year-end (Goldman Sachs);
Extreme scenario: Persistent inflation surges, Fed continues to hike rates, gold plunges below $4,000.

Long-term (2–5 years): Bull market remains, median rises steadily

1. Long-term support from de-dollarization globally and continuous central bank gold purchases, with weakening currency credit boosting gold reserve value;

2. Persistent high debt levels and normalized geopolitical conflicts, with gold’s anti-inflation and safe-haven fundamentals intact;

3. Clear long-term downward cycle in real interest rates, with gold prices generally oscillating upward, with institutions projecting long-term targets of $6,000–$8,000.

III. Domestic Gold Price Reference

International gold prices influence domestic Shanghai gold and jewelry prices, with short-term fluctuations following overseas markets; jewelry gold prices are less affected by brand premiums and decline less than raw gold, and in the medium to long term, they follow international cycles.

Risk warning: The above is solely an analysis of market logic and does not constitute any investment buy/sell recommendations.