Gold prices have once again experienced a rollercoaster ride, with outflows from gold ETFs exceeding 2 billion yuan in the week before the holiday. Are those "stuck at the peak" likely to break even?

The international gold price trend took investors on a heart-stopping "rollercoaster" ride at the turn of spring and summer in 2025.

On April 22, the spot gold price briefly surged to a record high of $3,500 per ounce, pushing market sentiment to a frenzy. However, within just two weeks, gold prices plummeted, hitting a low of $3,209.4 per ounce.

Just as investors were gripped by panic, gold staged a strong comeback on the first trading day after the Labour Day holiday (May 6), with spot gold prices briefly soaring to $3,395 per ounce. As of press time, spot gold was trading at $3,390 per ounce.

Industry insiders attribute this extreme volatility to global macroeconomic uncertainties, reflecting irrational investor impulses and the market's complex expectations regarding a potential policy shift by the US Fed.

Gold ETFs saw net outflows before the holiday, with some investors selling off gold

Despite mounting concerns about elevated gold prices on the eve of the Labour Day holiday, capital flows in gold ETFs sent mixed signals. Many investors saw this as a "buy-the-dip" opportunity, viewing it as a prime time to enter the market. Others believed gold prices had peaked and opted to hold cash during the holiday instead.

The capital flows in gold ETFs before the holiday underscore this trend. Data shows that during the five trading days in the week before the holiday (April 24-30), as international gold prices trended downward, the 13 gold ETFs across the market collectively experienced net outflows totaling 2.153 billion yuan.

Specifically, Hua'an Gold ETF saw net outflows of 4 billion yuan in the week before the holiday, while ChinaAMC Gold ETF recorded net outflows of 117 million yuan. Additionally, six ETFs tracking the CSI Shanghai-Hong Kong-Shenzhen Gold Industry Stock Index all experienced net outflows in the week before the Labour Day holiday.

However, some investors still chose to buy gold through ETFs at the lows. Bosera Gold ETF saw net inflows of 808 million yuan in the week before the Labour Day holiday, while Guotai Gold ETF, E Fund Gold ETF, and ICBC Gold ETF each recorded net inflows exceeding 100 million yuan, at 569 million yuan, 565 million yuan, and 241 million yuan, respectively. Qianhai Open Source Gold ETF also saw net inflows of 70 million yuan. This reflects some investors' strategy of "buying the dip" during price corrections.

Borrowing to buy gold? Those who entered at the peak are "stuck at the summit"

The extreme volatility in the gold market serves as a mirror, reflecting irrational investor behavior. The capital flows in gold ETFs mentioned above also highlight the investment decisions of some investors.

During the surge in gold prices to $3,500 per ounce in April, "buying gold" emerged as the most crowded trade globally. Chinese investors were particularly active during this rally. On April 22 alone, the combined daily trading volume on the Shanghai Gold Exchange and the Shanghai Futures Exchange reached a staggering 989.1 billion yuan, setting a new historical record. However, this frenzy concealed significant risks—some investors entered the market using high leverage or even loans, attempting to achieve rapid wealth accumulation under the illusion of "guaranteed profits and overnight riches."

A review of social media platforms by Caixin reporters revealed that many investors had "bought gold with loans." One netizen bluntly stated, "Those who entered at the peak of 830 yuan are now stuck at the mountaintop."

Cases of "losing several years' worth of salary in a single day" were not isolated incidents. One investor confessed on social media that he had raised 1 million yuan in principal through credit cards, consumer loans, and online loans, investing it all in gold at its peak. "It started dropping right after I bought it," he said.

Similar stories abound on social media: some investors mortgaged their properties to chase highs, while others borrowed money to speculate on gold, only to find themselves trapped in a dilemma of "reluctant to sell but unable to hold on" due to price corrections. Many individual investors mistakenly viewed gold as a "unidirectionally rising" asset, overlooking its high volatility and multiple risk factors, ultimately leading to irrational losses.

Financial institutions' risk warnings and regulatory measures followed in quick succession. Starting from April 23, the Shanghai Gold Exchange increased the margin ratios for some futures contracts, and several banks explicitly prohibited the use of credit card funds for gold investments. While these measures curbed speculative behavior to some extent, they also exposed a deeper issue of inadequate market education—ordinary investors lacked a clear understanding of the distinction between gold's hedging properties and short-term speculation.

Institutions remain bullish on gold's long-term outlook

Despite severe short-term volatility, most institutions remain optimistic about gold's medium and long-term allocation value.

In a report released on Monday (May 5), Goldman Sachs stated that strong central bank demand for gold had structurally driven up the gold-to-silver price ratio, and that gold would continue to outperform silver. The bank reiterated its "structurally bullish" view on gold, projecting that under its base case scenario, gold prices would reach $3,700 per ounce by the end of the year and rise to $4,000 by mid-2026.

Goldman Sachs also pointed out that in the event of an economic recession, accelerated inflows of ETF funds could push gold prices up to $3,880 by the end of the year. Under extreme risk scenarios—such as heightened market concerns about the US Fed's independence or changes in US reserve policies—gold prices could potentially rise to $4,500 by the end of 2025.

Guotai Junan Futures stated that the core imbalance in the current market lies in the tug-of-war between the unchanged medium and long-term risk-aversion logic (geopolitical risks, de-dollarization) and the lack of new catalysts in the short term. If no events such as inflation exceeding expectations or an escalation of geopolitical conflicts emerge on the macro front, gold prices may enter a phase of consolidation, with upward breakthroughs requiring the support of incremental capital. Quantitative models indicate the coexistence of trend momentum and reversal pressure, and AI sentiment indicators suggest that when market divergence intensifies, counter-trend trading can be considered. Overall, gold is still in a transition window from a "rapid bull market to a slow bull market." It is recommended to adopt defensive strategies to cope with high volatility and wait for signals of a breakthrough in fundamentals.

A research report by Galaxy Securities stated that a breakout in gold prices may require waiting for a US Fed interest rate cut or a surge in physical gold demand. In the future, it is necessary to further observe the US economic situation, whether it is stagflation or recession. If stagflation occurs and the US Fed does not cut interest rates, gold prices are likely to exhibit a volatile upward trend. If a recession occurs, gold prices will follow the correction of other commodities until the US Fed initiates an interest rate cut. The volatile range for gold has been systematically raised to $3,150 to $3,550, and gold is expected to rise above $3,700 after a US Fed interest rate cut. In addition, robust demand for physical gold may drive gold prices higher again in the second half of the year.

Liu Tingyu, the fund manager of Yongying Gold Stock ETF, believes that the characteristics of stagflation in the US economy are evident. The structure of the current non-farm payrolls data and the downward revision of the previous figures reflect ongoing pressure in the US job market. Subsequently, the US dollar and US Treasury yields are likely to resume their downward trajectory, providing medium-term support for gold.

Looking ahead, the US Fed's interest rate cut cycle and the stagflation environment in the US are still conducive to the continued rise in gold prices. As the erosion of the creditworthiness of the US dollar and US Treasuries intensifies due to further increases in US tariff uncertainty and deficit ratios, the global trend of "de-dollarization" accelerates. Both central banks, institutional investors, and individual investors are more motivated to continuously increase their allocation of gold assets.