Gold falls below the $4,000 mark, ending a three-year bull market?

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Gold, one of the world’s most crowded long trades this year, is experiencing a dramatic reversal.

On June 24, spot gold fell below $4,000 per ounce during trading, marking the first time this key psychological level has been breached since last November. Since reaching a historic high of nearly $5,600 per ounce at the end of January this year, gold prices have retraced about 29% in total, officially entering technical bear market territory.

Over the past three years, gold posted consecutive double-digit annual gains, with prices doubling. Multiple factors—including central bank gold purchases, expectations for global interest rate cuts, concerns about U.S. dollar credit, and geopolitical conflicts—have resonated together, making gold one of the most sought-after assets worldwide. However, with the Federal Reserve’s policy outlook making a sharp turn, the U.S. dollar index strengthening, and safe-haven demand notably cooling, the core logic supporting higher gold prices is facing a substantive challenge.

Recently, a number of Wall Street institutions have frequently lowered their gold price targets, with Goldman Sachs, Deutsche Bank, Citi, and Morgan Stanley all turning more cautious in succession. The market is beginning to reassess a key question: Has the three-year super bull market in gold come to an end?

Interest Rate Expectations Reassessment Becomes Gold’s Biggest Headwind

The core reason for this round of gold’s correction comes from the market’s repricing of U.S. interest rate trajectory.

Previously, U.S.–Iran tensions once pushed international oil prices sharply higher, raising market concerns that higher energy prices would spill over into inflation, in turn forcing the Federal Reserve to maintain higher interest rates. Although crude oil prices have recently pulled back as ceasefire talks advance, market vigilance toward inflation has not fully dissipated.

More importantly, the new Federal Reserve Chair Walsh sent a clear hawkish signal during his first FOMC meeting. The market is starting to price in the possibility of further rate hikes before year-end, with U.S. Treasury yields remaining elevated and the dollar index rebounding accordingly.

For non-interest-bearing gold, a high-interest-rate environment means increased holding costs and capital is more inclined to flow into yield-bearing assets such as Treasuries. ING analysts believe that the primary driver of gold’s recent drop is precisely the significant reassessment of rate expectations.

Gold ETF Outflows Continue, Physical Consumption on the Sidelines

Besides macro headwinds, capital flows also point to caution. According to Deutsche Bank, gold ETFs continue to record net fund outflows, reflecting how traditional asset allocators' interest in gold is clearly waning.

At the same time, there’s no sign of recovery on the physical consumption side either. Despite domestic mainstream gold jewelry brands seeing cumulative price corrections of over 460 yuan/gram from this year’s highs, the offline market has not seen the expected bargain hunting.

Influenced by a “buy on rise, not on fall” sentiment, most consumers are staying on the sidelines, waiting for further downward adjustment. Multiple gold retailers report that even with promotions like discounts on weight and waiving processing fees, store foot traffic and actual transactions remain low, and overall market activity is rather muted.

Investment Banks Intensively Lower Gold Price Forecasts; Central Bank Buying Becomes the Only “Pillar”

With international gold prices continuously retreating, numerous Wall Street investment banks have recently lowered their price forecasts en masse, showing a cautious stance towards gold’s short-term outlook.

Goldman Sachs slashed its year-end gold target by $500 to $4,900/oz; Deutsche Bank cut its third- and fourth-quarter targets to $4,300 and $4,800, with some forecasts lowering by more than 20%. BMO Capital Markets also lowered its average gold price forecast for the second half by 5%, and pointedly indicated that U.S. monetary policy direction remains the biggest uncertainty risk facing gold.

Against the backdrop of numerous negative factors, central bank demand for gold has become the most solid “ballast stone” for the market.

According to the latest data, global central banks’ net gold purchases in Q1 this year hit a new high in over a year, with many central banks continuing to increase their holdings. Surveys indicate that official buying momentum is very likely to remain strong over the next several years. Deutsche Bank’s latest report bluntly states that central bank demand is now the “only remaining solid pillar” in the gold market.

This means that, while speculators’ exodus, ETF reductions, and slowing consumer demand are suppressing gold prices, official reserve demand is temporarily preventing a deeper collapse in the market.

The $4,000 Level “Defense Battle” Begins

For the market, $4,000/ounce is not only a round number, but also a significant psychological barrier.

If gold prices can stabilize at this level, it means the market has largely digested the negatives of rising rate hike expectations, a strengthening dollar, and cooling geopolitical risks, and may enter a phase of bottom-building consolidation.

But if $4,000 is breached and continues to fall, it could trigger further forced liquidations by algorithmic and leveraged traders, leading to a new wave of selling pressure.

From a longer-term perspective, the core drivers of gold’s three-year bull run—global central bank purchases, expansion of fiscal deficits, and diversification trends in the monetary system—have not completely disappeared. But in the short term, the market’s main logic has already switched from a “rate-cut trade” to a “high-rate trade.”

For gold, this may not mean the end of its long-term bull market, but at the very least, the nearly unilateral gold rally has already come to an end.

Risk Warning and DisclaimerThe market has risks; investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Invest at your own risk. ```