On Monday the 27th, the international spot gold price broke through the $4000/ounce mark, dropping by about 9% from its peak last week. Many investors who had taken out loans to buy gold are now regretting their decisions, with some even lamenting that they have lost “two months’ worth of income in three days”. While several international institutions predict that gold prices will continue to rise in 2026, some analysts believe that the foundation of the gold bull market may not be as solid as it seems.
The international spot gold price fell to $3,996.08/ounce on Monday, October 27th, experiencing a decrease of about 9% from recent highs, breaking the $4000/ounce barrier. In China, the prices of gold jewelry dropped as well, with prices at Chow Tai Fook at 1223 yuan/gram, a decrease of 0.73%, and prices at Lao Feng Xiang at 1220 yuan/gram, a decrease of 0.65%.
Pessimism has spread among investors on social media platforms. Comments like “Bought gold funds only to see them drop, should I sell now?”, “Don’t want to watch the market anymore, lost a month’s worth of profit in a day”, “Thought I bought at the right time but lost five to six thousand yuan, thinking of cutting losses and leaving”, and “The first victims of the gold price drop have appeared”, “Gold price plunge leads some to consider returning recently purchased bracelets” have become trending topics.
An investor from Shandong, Mr. Li, told a reporter from the China Securities Journal that he bought bank accumulated gold on October 20th, with his account in the positive for only one day, and he’s now considering cutting his losses. A report from Caijing mentioned that a woman named Li from Shenzhen lost around 30,000 yuan in the first three days of the gold price drop, equivalent to two months’ worth of salary, and is beginning to regret having heavily invested.
Financial trading platform Capital analyst Kyle Rodda believes that Monday’s sharp drop in gold prices was influenced by the trade agreement framework reached between the US and China on Sunday, October 26th.
He stated: “The potential trade agreement between the US and China is a positive signal for the overall market, but unfavorable for gold. The market enthusiasm has diminished, and market sentiment is gradually fading.”
Gold prices have been experiencing a rollercoaster ride in the past three months. Starting from the end of August, international gold prices surged significantly, with the price of London gold spot reaching a high of $4381/ounce on October 20th, pushing the year-to-date cumulative increase to nearly 70%.
However, on October 21st, the spot gold price plummeted by 5.3% to $4125.22 per ounce, the largest single-day decline since April 2013. By October 26th, the price of foot gold jewelry at a Chow Sang Sang store in Beijing was quoted at 1224 yuan per gram, a decrease of over 60 yuan from five days ago.
As gold prices continued to rise, investors leveraged funds through online loans, credit card cash withdrawals, and other means to enter the market.
Li obtained consumer loans through multiple channels, with her loans for gold market investment amounting to as much as 300,000 yuan at its peak. Lin Sheng, engaged in the internet industry in southern China, mortgaged an idle property at his hometown a few months ago, investing the loan funds in the gold market. He even converted half of his income and savings into gold assets.
Economist Ma Guangyuan posted a video on the social media platform Douyin on Monday the 27th, stating that gold is not a good investment, but rather a defensive and fundamental protection. He expressed that once ordinary people leverage or take out loans for gold investment, the consequences could be dire, as a slump in gold prices could lead to double the losses. During the 2008 gold rally, prices soared to $1900, but almost dropped below $1000 later on. The majority of gold price declines often result in significant losses.
The Financial Times reported on Monday the 27th that outgoing London Bullion Market Association Chairman Paul Fisher stated, “Prices (of gold) typically do not continue to rise,” attributing the recent spike to market “bubbles”.
He added, “That’s why last week’s movement is crucial. It poked a hole in the market bubbles, causing a pullback that clears out speculative positions, after which the market is likely to rise again. Prices may continue to rise.”
Gold is a traditional hedging instrument during uncertain times, influenced by factors such as geopolitical concerns, trade turmoil, and the diminishing dominance of the US dollar.
David Russell, from precious metals company GoldCore, stated, “Gold’s performance in 2025 not only reflects a wave of upward momentum but also signifies an acceptance of new realities. The market no longer reacts to short-term impacts but instead responds to deeper loss of confidence in policy makers, currencies, and financial systems.”
Despite the recent significant pullback in gold prices, the latest 2026 gold price forecasts show a bullish overall market outlook.
Goldman Sachs predicts that gold prices may rise to around $4,440 in the first quarter of 2026, increasing to about $5,055 by the fourth quarter, primarily driven by the enduring demand of “resolute buyers” including central banks and ETFs.
A survey by Reuters of 39 analysts forecasts an average gold price of $3400 per ounce for 2025, expected to rise significantly to around $4,275 by 2026 due to ongoing economic and geopolitical uncertainties maintaining gold’s hedging appeal.
Morgan Stanley has raised its 2026 gold price forecast to $4,400 per ounce, anticipating accelerated gold price momentum driven by continued macroeconomic uncertainties.
Moreover, several banks including HSBC, Bank of America, and Credit Agricole have set next year’s gold price target at $5000.
However, Wall Street holds a different view. Bank of America strategist Michael Hartnett pointed out that the logic supporting gold prices through “devaluing trades” might not be solid, indicating that the foundation of the gold bull market may not be as robust as perceived.
Hartnett listed three major warnings: first, the yield on the 10-year US Treasury remains below 4%; second, the US recorded a budget surplus in September; third, the US Dollar Index (DXY) has yet to break below its April low. These signals suggest that the basis for going short on the dollar and long on gold trades may not be as sturdy as imagined! Even J.P. Morgan, bullish on gold, has listed “Central banks slowing down purchases” as the biggest risk in their bull market forecast.
Blogger “Bank Li Juan” posted a video on social media platform emphasizing, “Gold is for wealth preservation, not for getting rich quick.” Economist Ma Guangyuan concurs, adding, “When investing in gold, ordinary people should not emulate central banks and institutions. Central banks buy gold for asset security, which is reasonable because they understand that their currency may not withstand a variety of future risks.”