Gold prices have fallen below $4,000, and the size of gold ETFs has shrunk by 50 billion yuan. Don’t rush to buy the dip!

International gold prices have suddenly lost the $4,000 integer mark. Following a single-day drop of 2.93% and 3.21% for London spot gold and COMEX gold on June 24, with intraday declines below $4,000 per ounce, international gold prices continued their downward trend on June 25, falling nearly 30% from the year's highs. The sharp pullback in gold prices has directly dragged down the net value performance of some gold-themed funds. Meanwhile, the size of gold ETFs has been gradually declining, with total shrinkage exceeding 50 billion yuan since the second quarter. According to analysts, this round of gold price decline is related to factors such as the fading of geopolitical risk premiums and changes in the dollar and interest rate environment. In the short term, gold prices still face adjustment pressure, but there is structural support in the medium term. For investors, it is not recommended to bottom-fish at this time.

Gold ETFs Shrink Over 50 Billion Yuan in Q2

The gold market has experienced a significant correction. Following a single-day drop of 2.93% and 3.21% for London spot gold and COMEX gold on June 24, respectively, with intraday levels briefly breaking below the $4,000 mark, international gold prices continued their downward trend on June 25. Wind data shows that as of 19:30, London spot gold fell 0.35% to $3,977.8 per ounce, with an intraday low of $3,962.09 per ounce, hitting a new low since November 2025. Meanwhile, COMEX gold was at $3,993 per ounce, down 0.39%.

It is worth noting that the above price of London spot gold has fallen nearly 30% from the historical peak of $5,598.75 per ounce set in January this year. Domestic gold jewelry prices have also been declining in recent days. For example, on June 25, the latest gram price of Chow Tai Fook gold jewelry fell to 1,222 yuan per gram, down 28% from the peak of 1,706 yuan per gram in January. During the same period, the gold jewelry prices of Chow Sang Sang, Lao Miao Gold, and Lao Feng Xiang have also fallen nearly 30% from their previous highs.

The sharp pullback in gold prices has directly dragged down the net value performance of some gold-themed funds. Since the second quarter, the net value growth rates of gold ETFs have all fallen, and the scale of most gold ETFs has been gradually decreasing. Wind data shows that as of June 24, the net value growth rate of the largest Huaan Yifu Gold ETF has fallen 12.34% since the second quarter. The fund's scale has also significantly decreased since the second quarter, from 113.82B yuan at the end of the first quarter to 90.13B yuan on June 24, a shrinkage of over 23 billion yuan.

The above situation is not an isolated case. The second and third largest gold ETFs by scale, Boshi Gold ETF and E Fund Gold ETF, currently have sizes of approximately 40.86B yuan and 34.37B yuan, respectively, both reduced by about 7 billion yuan from the end of the first quarter. Overall, the total size of the 14 gold ETFs in the market is approximately 252.49B yuan, down 51.52B yuan from 304.01 billion yuan at the end of the first quarter, a decrease of 16.95%.

Regarding the sharp drop in gold prices this round, Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance, believes there are three core driving factors: First, the fading of geopolitical risk premiums. The US-Israel-Iran conflict in June briefly intensified but quickly led to a ceasefire agreement, sharply cooling market risk aversion. As a safe-haven asset, the premium support for gold was rapidly withdrawn. Second, changes in the dollar and interest rate environment. The Federal Reserve maintained high interest rates for longer than market expectations in 2026, and the strengthening dollar suppressed gold priced in dollars. Real interest rates remained high, increasing the opportunity cost of holding gold, and speculative funds accelerated their exit. In addition, there was speculative fund stampede and technical breakdown. After gold prices broke through key support levels, algorithmic trading and leveraged fund chain liquidations were triggered, forming a "longs killing longs" pattern. The previous significant reduction in non-commercial net long positions in COMEX gold futures led to an exodus of speculative funds, exacerbating the decline.

Financial commentator Guo Shiliang also pointed out that the sharp drop in gold prices may be directly linked to the recent strengthening of the dollar. Historically, there has been a significant negative correlation between the dollar and gold prices. As the dollar enters a new upward cycle, gold also comes under significant pressure. In addition, the decline in international gold prices is related to the excessive increase in early stages and the current market's profit-taking needs. "Gold prices have entered a technical bear market, and the probability of gold starting a bear market has increased significantly, which may also confirm the saying of the ten-year rising curse in the gold market," Guo Shiliang said bluntly.

Gold Prices Still Face Adjustment Pressure in the Short Term

Facing continued weak gold prices, some international investment banks have also lowered their full-year target prices. In a latest report released on June 23, Deutsche Bank Research analyst Michael Hsueh stated that Deutsche Bank expects gold prices to average around $4,300 per ounce in the third quarter of 2026, down more than one-fifth from previous forecasts, and the fourth-quarter average price is expected to rise to $4,800 per ounce, still about 17% lower than the previous target. Meanwhile, Michael Hsueh said that if the Federal Reserve ultimately chooses to raise interest rates rather than keep them stable, gold prices could fall to around $3,800.

In addition to Deutsche Bank, Bank of Montreal has also lowered its gold target price. In its Q3 commodity outlook report, it said it expects the average gold price in the second half of this year to be around $4,625 per ounce, down 5% from previous expectations. It also pointed out that as the market begins to actively price in the possibility of a rate hike before the end of the year, US monetary policy remains the biggest and most urgent threat to gold and silver prices.

Bai Wenxi analyzed, "In the short term, gold prices still face adjustment pressure. The intensive downward revisions of target prices by investment banks reflect that the market's repricing of the macro environment is not yet complete. If the Fed maintains a hawkish stance, gold prices may test lower support. In the medium term, gold prices have structural support. The global de-dollarization trend remains unchanged, and central bank gold purchases provide bottom-line support. However, it should be noted that if the US economy achieves a 'soft landing' and inflation continues to decline, gold's narrative as an anti-inflation asset will be weakened. Gold prices in 2027 are likely to show a wide range of volatility, with the center significantly lower than in early 2026, but a sustained collapse is unlikely."

As Bai Wenxi said, central bank gold purchases are still quite evident. On June 16, the World Gold Council released the "2026 Central Bank Gold Reserves Survey," showing that central banks continue to hold optimistic expectations for gold. Specifically, 89% of surveyed central banks expect global central bank gold reserves to increase over the next 12 months. 45% of surveyed central banks believe their own institutions will increase gold reserves over the next 12 months, breaking the historical record.

Bai Wenxi added, "Central bank gold purchases and speculative funds are fundamentally different logics. Central bank purchases are based on the long-term strategy of reserve diversification and de-dollarization, with characteristics of counter-cyclicality and low sensitivity; while speculative funds chase short-term price differences, with characteristics of pro-cyclicality and high volatility." He pointed out that central bank purchases can serve as a "ballast stone" to a certain extent, with stable and sustained demand that can provide support during extreme market pessimism. However, the amount of central bank purchases relative to the global annual gold trading volume is still limited and cannot fully offset the impact of speculative fund outflows. More importantly, central bank buying itself has the characteristic of "buying more as prices fall." This counter-cyclical operation will smooth volatility but is insufficient to reverse the trend direction dominated by macro fundamentals.

Investors Are Not Recommended to Bottom-Fish at This Time

The current sharp fluctuation in gold prices has sparked widespread market discussion. Some investors believe that the gold price correction presents bottom-fishing opportunities, while many market participants are cautious and adopt a wait-and-see attitude, fearing the end of the gold bull market.

Guo Shiliang pointed out that the future direction of gold prices depends to some extent on the direction of the dollar index. If the dollar peaks again and falls, gold prices may also stabilize again. If the dollar continues to strengthen, it is hard to say that gold prices have bottomed out. He suggests investors patiently wait for the stabilization process of gold prices. Gold is a non-yielding asset, and investing in gold during a downtrend or consolidation trend requires caution, as it may bear the risk of price fluctuations and high time costs.

For investors who already hold gold, Bai Wenxi suggests that if the allocation ratio of gold assets is too high (exceeding 10% to 15% of total assets), they can appropriately reduce positions to control the risk exposure of a single asset. If the position is reasonable and the investment period is long, they can temporarily hold and wait, avoiding selling at a loss at emotional lows. Gold's function as a safe-haven asset has not disappeared; it is just currently in a valuation regression period.

For investors who want to enter, Bai Wenxi does not recommend bottom-fishing at this time. "Technical aspects have not shown clear signs of stabilization, and the wave of downgrades in target prices by investment banks may continue. A dollar-cost averaging strategy can be adopted, with batch building positions to smooth costs. Priority should be given to gold ETFs with good liquidity and low fees, avoiding high-premium products. Gold is a configuration tool rather than a speculative target, and decisions should be based on asset preservation needs rather than short-term price difference expectations. In the current environment, patience is more important than chasing timing," Bai Wenxi summarized.

(Editor: Xu Nannan)

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