Gold and Silver Short-Term Plunge, Gold Falls Below $4,000: Is the Correction the End of the Bull Market or a Temporary Pullback?

Keywords: Gold Price, Silver Price, Federal Reserve, US Dollar Strengthening, Inflation Expectations, Gold Bull Market, Safe-Haven Asset, Global Central Bank Reserves, Geopolitical Risk

Introduction

Recently, the international precious metals market has experienced notable volatility. On June 26, spot gold plunged intraday, falling below the $4,000/oz mark again, with an intraday decline of over 1%; spot silver fell even more, briefly losing the $56/oz level. Compared to the high of $5,321/oz touched in early March, international gold prices have retreated over 25%. This sharp decline has triggered widespread discussion about whether the gold bull market has peaked.

On the surface, the rapid drop in gold prices seems to indicate a shift in market winds: the previously sustained safe-haven logic has weakened, the dollar has strengthened again, and global risk assets are generally under pressure. However, when analyzed from the perspective of macro background, policy paths, and historical cycles, this correction appears more like a high-level pullback and trend rebalancing, rather than the end of the long-term gold bull market. The essence of the gold market still depends on the joint game of four variables: inflation, interest rates, the dollar, and geopolitics.

1. Why Market Sentiment Suddenly Reversed

The recent precious metals price volatility is not an isolated event but a concentrated reflection of changes in global macro expectations. A research report from CICC points out that current market panic stems mainly from two factors: one is heightened inflation concerns, and the other is the Fed's policy stance shifting to a more 'hawkish' tone.

From the inflation perspective, the US-Iran conflict has pushed up expectations for international oil prices, thereby strengthening market concerns about inflation stickiness. Energy prices are often an important transmission variable for inflation expectations. Once oil prices continue to rise, the market will quickly reassess the pace of US inflation decline and postpone expectations for monetary easing. Such changes in expectations will directly reflect in bond yields, the dollar index, and gold pricing.

At the same time, the Fed's recent statements have been interpreted by the market as 'turning hawkish'. In investors' eyes, the Fed currently places more emphasis on 'controlling inflation' rather than prioritizing support for economic growth. The futures market has even begun pricing in rate hikes by the Fed in 2026 and 2027 to restore dollar credibility. For gold, this policy expectation undoubtedly constitutes significant pressure, as gold itself yields no interest, and higher real interest rates and a stronger dollar both weaken its appeal.

Therefore, the current gold and silver plunge is not driven by a single factor, but is the result of the triple pressure of inflation, interest rates, and exchange rates resonating together.

2. Why the Dollar Is Strengthening Again and Gold Is Under Pressure

Liu Dongbo, senior analyst at Guotou Futures Research Institute, pointed out that recent strengthening of US inflation, heightened expectations of Fed rate hikes, US Treasury Secretary Bessent's emphasis on a strong dollar tendency, and US promotion of oil trade settlement in dollars with Iran, all further strengthen the dollar system. Multiple factors jointly drive a trend-like strengthening of the dollar, causing a general decline in global risk assets.

This logic chain is very clear: rising inflation expectations prompt the market to re-bet on tightening policies; tightening expectations support the dollar; a stronger dollar then suppresses gold prices denominated in dollars. More importantly, the dollar is not just a trading currency; it is also the core anchor for global asset pricing, liquidity, and risk appetite. When the dollar rises, it often means global funds flow back to US assets, putting pressure on non-US assets and commodities.

For gold, the impact of a stronger dollar is particularly direct. On one hand, gold is priced in dollars, and a stronger dollar raises the purchase cost for holders of other currencies. On the other hand, a strong dollar is usually accompanied by an increase or maintenance of high real interest rates, which reduces the attractiveness of gold allocation. In this environment, it is difficult for gold to continue its previous unilateral rapid rise.

Silver's volatility is more elastic. Silver has both precious metal and industrial metal attributes. When risk appetite declines, it tends to fall faster than gold. Silver's brief loss of the $56/oz level reflects rising market concerns about global growth and industrial demand.

3. Is the Gold Bull Market Really Over? Historical Experience Does Not Support a Linear Judgment

Although gold prices have corrected sharply in the short term, equating this directly to the end of the gold bull market is clearly too hasty. CICC reviewed five gold bull markets since 1970 and found an important pattern: the end of a gold bull market typically requires two conditions to be met simultaneously - significant tightening of Fed policy and a comprehensively improving economic fundamental. Neither is dispensable.

This historical experience means that the long-term trend of gold prices is not determined solely by inflation data at a certain point or a single policy statement, but depends on whether the macro environment has undergone a systemic reversal. In other words, if inflation is only a temporary rebound but the US economy has not truly entered a strong recovery track, or if the Fed is verbally hawkish but actual policy does not continue to tighten significantly, gold often only enters a correction range rather than completely turning bearish.

CICC believes that the two factors of inflation panic and Fed hawkishness should not be linearly extrapolated. US inflation may have peaked and could enter a downward channel in the second half of the year. The tough stance of Fed leaders may be more about reserving space for future policy to return to easing. That is, the current 'hawkishness' does not necessarily mean that the long-term monetary environment has reversed.

From this perspective, this gold correction appears more like a technical adjustment after excessive earlier gains and a repricing of the policy path by the market, rather than the end of the long-term gold bull market.

4. The Medium-to-Long-Term Support Logic for Gold Has Not Changed

Li Gang, Research Director of China Foreign Exchange Investment Research Institute, said that the fall of international gold prices below $4,000/oz is not the end of the long-term gold bull market, but a phased correction after the previous rapid rise. Behind this judgment is still the long-term logic of gold as a global core safe-haven asset and reserve asset.

First, the trend of global central banks continuing to increase gold holdings has not changed. In recent years, more and more economies have been increasing gold allocation for reasons of asset security, reserve diversification, and reducing dependence on a single currency. Central bank gold purchases have clear strategic attributes and are not easily reversed by short-term price fluctuations. This 'official demand' constitutes an important underlying support for the gold market.

Second, the global high-debt environment still exists. Whether it is the US fiscal deficit or the debt burden of major economies, they are constantly raising uncertainty in the global financial system. In a high-debt context, gold's allocation value as a credit-risk-free asset will be continuously reassessed. As long as the long-term trends of global debt expansion and monetary easing are not fundamentally reversed, gold is unlikely to lose its strategic appeal.

Third, the trend of international reserve diversification is still advancing. Intensified geopolitical frictions, global supply chain restructuring, and divergence in payment and settlement systems all strengthen countries' emphasis on the security of reserve assets. Gold, as an asset that does not rely on any sovereign credit, remains an important safe-haven and reserve tool in this context.

Li Gang also pointed out that future gold trends are likely to shift from the previous unilateral rise to a phase of high volatility and wide fluctuations. Short-term adjustment pressure remains, but medium-to-long-term trends still depend on Fed policy, dollar movements, and changes in global geopolitical risks. This means that investors need to accept the new normal of 'high-level oscillation, repeated tug-of-war' for gold, rather than simply extending the linear expectations of past rapid gains.

5. Key Support Zone Approaching, Market Faces Directional Choice

From a technical and trading perspective, Liu Dongbo believes that international gold prices are currently testing support in the 3900-4000 $/oz area from the low of Q4 2025, facing a critical directional decision. If this support zone is effectively broken, lower space may open up further.

This judgment has strong practical significance. The 4000-dollar integer level itself has significant psychological meaning, as both an important watershed for market sentiment and a dense area for capital games. If gold prices can stabilize near this level, it means the market has digested the impact of the Fed's hawkishness and dollar strength to some extent, and could subsequently return to a range repair track. If support is lost, it indicates that the market's confidence in gold is still insufficient for the time being, and short-term funds may continue to exit.

However, even if a deeper correction occurs, it does not mean the medium-to-long-term logic of gold is destroyed. The precious metals market often exhibits characteristics of 'fast rise, fast fall', especially when prices reach high levels, profit-taking, leveraged fund stop-losses, and emotional reversals all amplify volatility. Therefore, judgment on gold should not look only at short-term K-lines, but also at the underlying policy, inflation, and geopolitical framework.

Conclusion

Overall, the recent short-term plunge in international gold and silver is the result of rising inflation expectations, a hawkish Fed stance, a stronger dollar, and declining risk appetite. Gold falling below $4,000/oz certainly releases a signal of phased pressure, but from the perspective of macro logic, historical patterns, and medium-to-long-term allocation value, this is more likely a high-level correction rather than the complete end of the gold bull market.

For the outlook, investors should maintain more rational judgment: in the short term, watch Fed policy phrasing, US inflation trends, dollar index changes, and geopolitical developments; in the medium to long term, focus on structural support from global central bank gold purchases, high-debt environment, and reserve diversification. Gold may no longer continue the previous unilateral rapid rise, but its strategic allocation value has not disappeared.

In an environment of increased volatility, what the market needs is not emotional chasing of rises and falls, but patient observation of macro trends and disciplined allocation. For gold, the real test is not a single correction, but whether it can continue to play the role of 'safe-haven anchor' and 'value anchor' in a more complex global financial landscape.