Original source: Wall Street Insights

On June 25, spot gold fell to US$3,978.60 per ounce - the first time it closed below US$4,000 since November 2025.

Five months ago, it stood at a historical peak of $5,595. Five months later, it dropped to $1,616, a drop of 28.9%.

This is not a panic plunge—no March 2020 stampede, no April 2013 flash crash. This is a slow, ongoing, structural disintegration of faith. Every bounce was sold, every support level was broken, until the last floor - $4,000 - was broken.

What really makes the market uneasy is not the price itself, but the narrative behind the price, which is collapsing piece by piece.

30%: An undervalued plunge

If you only look at the single-day range, gold's decline does not seem surprising - the decline on June 25 was only 1.6%. But when the timeline is stretched out, the true weight of this round of decline emerges.

From US$5,595.46 on January 29 to US$3,978 on June 25, gold has lost nearly 30% of its value in less than 5 months. This is equivalent to the epic 45% rise from October 2025 to January 2026, which has given back more than two-thirds.

Putting the 30% drop into historical context: the famous "gold massacre" in 2013 - the plunge caused by the Federal Reserve's hint of tapering QE - dropped 28% for the whole year. During the liquidity crisis in March 2020, gold fell from $1,703 to $1,451, a drop of less than 15%.

In other words, the decline of gold in the first half of 2026 has exceeded the level of the whole of 2013. 2013 was called "the end of the golden decade of the bull market", and it has only been five months now.

But there's something even more special about this decline: It's hardly accompanied by panic. There was no Silver Thursday in 1980, no liquidity black hole in 2008, or even the "sell everything" desperation of March 2020. Investors retreated in an orderly manner - every time the Federal Reserve issued a hawkish signal, they sold a little; every time the geopolitical situation eased, they sold a little more; every time the technical level broke, they accelerated a little.

This is a structural sell-off, not an emotional sell-off. Structural sell-offs are often harder to reverse than emotional sell-offs.

Triple strangulation: interest rates, US dollar, Iran

What is the force that can turn gold from the hottest asset in history to an outcast abandoned by Wall Street in just 5 months?

The answer is the resonance of three forces - they work simultaneously and reinforce each other, creating a macro environment that is extremely unfavorable to gold.

First level: The Fed’s hawkish turn

This is the most fundamental driving force for this round of decline.

In 2025, the market is pricing in "multiple interest rate cuts by the Federal Reserve in 2026" - this is the core narrative of gold soaring from $3,865 to $5,595. Zero-yielding gold is one of the assets that benefits most from a downward interest rate cycle because the opportunity cost of holding it falls.

But the reality in 2026 is exactly the opposite. CME FedWatch shows that the market expects the probability of the Federal Reserve to raise interest rates in September has risen to 68% - a week ago, this number was still 29%.

Federal Reserve Chairman Kevin Warsh’s hawkish words at the June FOMC meeting completely shattered expectations for an interest rate cut. Not only will interest rates not fall, they may even increase - a fundamental reversal of the narrative for investors holding zero-yielding gold.

ING analysts bluntly said: "The weakness of gold highlights that the market focus has shifted from safe-haven demand to the impact of higher interest rates and tighter financial conditions."

Second level: US dollar surges to one-year high

The reversal of interest rate expectations directly promotes the strength of the US dollar. The U.S. dollar index rose to its highest level in more than a year, posting six consecutive sessions of gains.

The stronger the dollar becomes, the more expensive gold becomes in dollar terms for holders of other currencies, systematically squeezing demand. Especially in traditional gold consuming countries such as India and Türkiye, the depreciation of local currencies has caused local gold prices to remain high, further suppressing physical demand.

Interest rates and the US dollar have always been a "double kill" combination for gold. When the two exert force at the same time, gold has almost no power to fight back.

The third level: Iran’s geopolitical premium returns to zero

If interest rates and the US dollar are fundamental constraints, the Iranian factor is the straw that breaks the camel's back.

In early 2026, the situation in Iran escalated - shipping in the Strait of Hormuz was threatened, and the risk of oil supply disruptions pushed oil prices higher, and gold's appeal as a "doomsday hedge" reached its peak. A considerable part of the historical high of $5,595 is geopolitical premium.

But now, the advancement of the US-Iran peace framework and the resumption of shipping in the Strait of Hormuz are erasing this premium.

Oil prices fell back to four-month lows and geopolitics turned from an inflation catalyst to a non-event ignored by the market. ING's comment hit the nail on the head: "Gold did not rise during the conflict and now falls after the conflict was resolved - this unusual sequence highlights the dominance of the interest rate channel in this move."

More subtly, gold did not perform as a safe haven during the conflict - which in itself is a manifestation of narrative collapse. When war cannot push the price of gold, it shows that the market's pricing logic for gold has undergone a fundamental change.

Wall Street surrenders

The most intuitive manifestation of narrative collapse is that the once most determined gold bulls are cutting target prices in unison.

Goldman Sachs lowered its price target for the end of 2026 to $4,900 from $5,400, adding that if the Fed does raise interest rates, gold could fall further to $4,400. This investment bank that shined in 2025 because of its accurate bullish view of gold now has to make concessions in the face of hawkish reality.

Deutsche Bank's move was even more drastic - it cut directly from US$6,000 to US$4,800, a drop of US$1,200, which almost overturned half of the previous bullish logic. Deutsche Bank also has a more pessimistic scenario: If the Fed raises interest rates three to four times, the price of gold could fall to $3,800 by the end of the year - about 5% lower than the current price.

Bank of America (BofA) simply gave up its previous target price of $6,000 and did not announce a new forecast-sometimes, silence is more lethal than prediction.

But there are sticklers. JPMorgan Chase maintained its year-end target of $6,000, while Wells Fargo stuck to a range of $6,100 to $6,300.

However, technical analysis from Finance Magnates chief analyst Damian Hemel gives a more pessimistic target than all banks: $3,440 - about 15% below current prices and 39% below all-time highs. His reason is simple: "US$4,000 has changed from support to resistance, and the 50-day moving average is about to cross below the 200-day moving average to form a dead cross. As long as the price of gold cannot recover above US$4,000, the bear market pattern will remain unchanged."

Goldman Sachs 4900, Deutsche Bank 4800, Technical 3440 - The degree of split in target prices itself shows one thing: all consensus has collapsed, and no one really knows where the bottom is.

Death Cross: Technical "Judgment Day"

For technical traders, the most nerve-wracking thing on the current chart is not the price, but an impending moving average crossover.

Gold’s 50-day moving average is quickly approaching its 200-day moving average. The gap between the two has narrowed significantly compared to when it was first noticed on June 22. Once the 50-day moving average crosses below the 200-day moving average - forming a so-called "death cross" - the mid-term trend reversal will be officially confirmed technically.

The death cross is not a precise selling point, but it is a signal - it tells the market: the trend has changed, don't use the logic of the past to go long.

In the history of gold, the frequency of death crosses is very low, but each time it corresponds to an important market turning point. The death cross in April 2013 started a two-year bear market for gold; the death cross in July 2022 marked the darkest moment for gold prices in the Fed's interest rate hike cycle.

The current death cross is not yet fully formed, but the fall below $4,000 has cleared the last obstacle for its arrival. Analysts at Finance Magnates point out that only a daily close above $4,300 - where the 200-day moving average is located - can neutralize this bearish signal.

The gap is 8% of the current price. In an environment where the U.S. dollar is super strong and expectations of interest rate hikes are rising, this 8% looks more like a wall.

The war of two markets: ETFs vs central banks

The gold market is undergoing a rare "two-level split": the upper level is the panic retreat of ETF investors, and the lower level is the strategic increase in holdings by central banks. The two forces operate in the same market but hardly talk to each other.

Upper level: 298-ton "underwater prisoner"

Suki Cooper, an analyst at Standard Chartered Bank, gave a shocking figure in a research report on June 24: At the current level of around US$4,000, approximately 298 tons of gold ETF holdings are at a loss - when the gold price was still above US$4,250, this number was 270 tons.

298 tons of gold, nearly $38 billion at current prices. The holders of these positions are not long-term allocation investors, but trading funds that rushed in in 2025 in pursuit of interest rate cut expectations. They bought in batches when the gold price was above US$3,800, rode a roller coaster, and are now trapped underwater.

More importantly, these "underwater prisoners" constitute the structural ceiling of gold's rebound. Whenever gold prices rebound toward their cost line, some positions will choose to unwind and exit—each rebound creates new selling orders.

Data from the World Gold Council show that global gold ETFs had a net outflow of 16 tons in May this year, and continued to lose blood in the first half of June. Although there was a weekly net inflow of US$1.1 billion last week, which temporarily interrupted the four consecutive weeks of redemptions, compared with the 298 tons of underwater stock, this return is only a drop in the bucket.

The lower level: the central bank's "silent big buyer"

But amid the hustle and bustle of the ETF market, a completely different group of buyers has been quietly receiving goods.

The 2026 Central Bank Gold Reserve Survey released by the World Gold Council on June 16 shows that nearly 90% of reserve managers expect global central bank gold holdings to increase in the next 12 months; 45% of central banks surveyed plan to increase their own gold reserves - this is the most extensive participation in the survey in nine years.

In the first quarter of this year, global central banks net purchased 244 tons of gold, exceeding the previous quarter and the five-year average. Poland increased its holdings by 14 tons in April, bringing the total to 45 tons during the year. The People's Bank of China has increased its gold holdings for 18 consecutive months. The Czech Central Bank also joined the buying bandwagon.

A more profound change comes from the European Central Bank. The "International Role of the Euro" report released by the European Central Bank in June confirmed a historic shift: gold has surpassed U.S. Treasury bonds to become the largest reserve asset of global central banks. Gold accounts for 27% of global central bank reserves, and U.S. debt accounts for 22%.

This change is driven by two forces: first, after Russia's foreign exchange reserves were frozen in 2022, emerging market central banks accelerated the process of "de-dollarization" of reserve diversification; second, the rise in gold prices itself magnified the weight of gold in reserves.

Central bank buyers have several characteristics that make them very different from ETF investors: they do not make decisions on a quarterly basis, they do not follow trends, and they do not set stop loss lines. A central bank that strategically targets a specific tonnage will have a stronger incentive to buy when gold prices fall - the same budget can buy more gold.

Is the gold myth busted?

Back to the original question of the article: Does the 30% plunge mean that the myth of gold is broken?

The answer is probably neither quite yes nor quite no.

From a narrative perspective, the belief in "gold will always rise" from 2025 to early 2026 has indeed been shattered. The four pillars supporting the high of $5,595 - interest rate cut expectations, dollar weakness, geopolitical crisis, and inflation panic - have fallen by three and a half. Rate cuts turned into hikes, the dollar turned from weak to strong, Iran moved toward peace, and oil prices fell to four-month lows.

From a structural perspective, the underlying buyers of gold have not disappeared. Central banks of various countries are buying, China is buying, Poland is buying. They buy gold not because "it will rise this month" but because "the U.S. dollar system is unreliable in the next ten years." This logic will not change just because the Fed raises interest rates once.

What really deserves attention is whether the "handover" between the ETF market and the central bank market can be completed smoothly. The underwater position of 298 tons will eventually be cleared - either through the gold price rebounding back above the cost line, or through the digestion of time. When this group of "hot money" exits, whether central bank buyers can support the bottom line of gold prices will be the core proposition that determines the long-term trend of gold.

Ronald-Peter Stoffele, author of Incrementum's "Gold Belief" report, proposed a seasonal framework: Historic bottoms for gold and mining stocks typically occur in late July or early August. "Don't have high expectations for the next few weeks, negative sentiment is strong and seasonality is very weak."

This judgment implies a short-term painful conclusion: gold's bottom may not be over yet. Whether the most pessimistic target prices of Deutsche Bank's $3,800 and Hermel's $3,440 will be verified depends on the attitude of the Federal Reserve's next meeting and the upcoming PCE inflation data.

But from a longer-term perspective, the diversification of central bank reserves, the trend of global "de-dollarization", and the rigidity of physical gold supply - these structural forces have not disappeared. They are just waiting, waiting for the hot money in ETFs to clear out, waiting for the turning point in the interest rate environment, and waiting for a new narrative to be rebuilt.

Gold is not dead. But it has changed from a thing that "goes up no matter how you look at it" to a thing that "needs to find a reason before it goes up." This in itself is the biggest change.