Gold’s May Rollercoaster: Where Is the Market Headed?
International gold prices experienced dramatic volatility in May 2026, swinging through a rollercoaster pattern that saw the precious metal surge to $4,773.58 per ounce before plunging sharply below $4,400. As markets enter June, analysts are divided on whether gold can recover its footing or faces further downside amid shifting monetary policy and global economic uncertainty.
According to Securities Daily, London spot gold rose 2.01% from May 1 to May 12, peaking at $4,773.58/oz. The rally reversed sharply, with prices plunging 3.74% from May 13 to May 29, repeatedly breaking below the $4,500/oz threshold and hitting a monthly low of $4,365.85/oz on May 28. A modest rebound on May 29 saw gold close at $4,538.16/oz, leaving it down 1.80% for the month overall.
Context & Background
The May turbulence follows a year of extraordinary moves. Gold surged to a record high of approximately $5,600/oz in January 2026, gaining more than 25%, as reported by China Financial News. However, after the outbreak of the US-Iran war in late February, gold entered an unexpected three-month downtrend, retracing roughly 18% from its peak by mid-May.
This counterintuitive decline — geopolitical conflict typically boosts safe-haven demand — reflects a more complex market dynamic. The new Federal Reserve chair’s hawkish policy stance, combined with a stronger US dollar and rising Treasury yields, has created powerful headwinds for the non-yielding asset.
Key Developments
Fed Policy and Inflation Pressures
The primary driver of gold’s May decline was shifting expectations around US monetary policy. The US April Personal Consumption Expenditures (PCE) price index surged 3.8% year-on-year, the largest increase since May 2023, dampening hopes for Federal Reserve rate cuts. Markets now price in a potential 25-basis-point rate hike by December 2026.
“The recent sharp fluctuations in gold prices are the combined result of rising expectations of Fed rate hikes, a stronger US dollar and US Treasury yields, the blunting of safe-haven sentiment, and technical oversold rebounds,” Zhu Hualei, Senior Investment Advisor at Shaanxi Jufeng Investment, told Securities Daily.
Central Bank Buying Provides a Floor
Despite the price weakness, structural demand for gold remains robust. The People’s Bank of China reported gold reserves of 74.64 million ounces (~2,321.56 tonnes) at end-April 2026, marking the 18th consecutive month of purchases, according to Sina Finance. Cumulative purchases since November 2024 total approximately 57 tonnes.
Globally, central banks net purchased 244 tonnes of gold in Q1 2026, up 3% year-on-year and above the five-year quarterly average, according to the World Gold Council. This sustained buying reflects a broader “de-dollarization” trend as nations diversify their reserve assets.
Chinese Banks Adjust Gold Products
In response to market conditions, multiple Chinese commercial banks adjusted their gold accumulation products in May. ICBC lowered its product risk rating from R3 to R2, extended trading hours, and offered fee discounts, as reported by Xinhua News Agency. Nankai University Finance Professor Tian Lihui noted that these adjustments reflect banks’ differentiated competition strategies, with ICBC aiming to expand customer coverage among stable investors.
HKEX Fee Waiver for Gold Futures
The Hong Kong Exchange announced on May 27 a full-market trading fee discount and incentive plan for USD gold futures, effective July 6, 2026 through June 30, 2027, including full fee waivers, as detailed by Futures Daily via CFA China. Fan Rui, Head of Nonferrous Metals Analysis at Guoyuan Futures, said the plan will reduce trading costs, particularly benefiting retail and short-term traders.
Analysis & Implications
Analyst forecasts for gold’s trajectory diverge significantly. UBS maintains a bullish year-end target of $5,600/oz, while Goldman Sachs projects $5,400/oz, though it warns of tactical downside risk to $3,800/oz if energy supply shocks worsen. Morgan Stanley has downgraded its target to $5,200/oz, citing a fundamental shift in the macro landscape.
In the near term, Zhu Hualei expects gold to oscillate in a wide range of $4,300–$4,600/oz, with no trend-setting rally until the Fed clearly signals a dovish stance. However, he noted that continued global central bank purchases and the de-dollarization trend will provide medium-to-long-term bottom support.
What’s Next
The key variables to watch include US inflation data (CPI and PCE), Fed policy signals, developments in the Hormuz Strait and oil prices, US-Iran ceasefire negotiations, and global central bank gold purchasing trends. For now, gold remains caught between the crosscurrents of hawkish monetary policy and structural demand — a tension that may keep prices range-bound until a clearer catalyst emerges.