The futures market is often regarded as a pioneer in price discovery. Recently, the international gold price plunged sharply in a single week, breaking through the key support level of $3,300, raising market doubts about the faith in gold. Jin Guoqiang, director of the Research Institute of Zhongzhou Futures, in an interview with the China Times, deeply analyzed the logic of gold price fluctuations and provided investors with operational strategy suggestions.
What is the nature of the current gold pullback? Is it a trend reversal or a short-term adjustment? Jin Guoqiang believes that the current situation is a “tail-end” bull market, and the medium and long-term support logic remains unchanged. There is support around $3,300. Based on the three major logics of de-dollarization, the US debt crisis, and potential stagflation, a deep correction presents a medium – to long-term configuration opportunity.
What should ordinary investors do now in the face of a decline? Should one cut losses, hold on, or buy? Jin Guoqiang suggests: Reduce leverage, position at low prices (rather than chasing high prices or cutting losses in panic), use options for protection, choose ETFs for spot trading, and hold with a regular investment mindset.
The tide of risk aversion has receded and expectations of interest rate cuts have been postponed
Jin Guoqiang pointed out that the current decline in gold prices is driven by two core factors. First, the risk-averse sentiment has waned. The situation in hotspots such as Gaza and Russia-Ukraine has cooled down, and market risk appetite has rebounded. The Geneva negotiations between China and the United States have reached a phased consensus, and the risk-averse sentiment triggered by the Trump administration’s reciprocal tariff policy has subsided. Second, expectations for the Federal Reserve to cut interest rates have weakened. The US added 147,000 non-farm jobs in June, exceeding expectations. The unemployment rate dropped to 4.1%, and inflation data remained stable, causing the probability of a rate cut in July to fall below 10% and be delayed until after September.
In the futures market, what key turning points have occurred in the power balance between the long and short sides of the main contract? Do these changes reveal a shift in market sentiment? Jin Guoqiang believes that, judging from the signals in the futures market, institutions are reducing their holdings at high prices, and the bull market has entered the “tail stage”.
The movement of funds reveals the shift in market sentiment. Jin Guoqiang said that domestic and foreign institutions simultaneously reduced their holdings at high prices. In the domestic futures market, the long position of the main force has decreased from a peak of 30,000 lots to 13,000 lots, and the net position proportion has dropped from 40% to 33%. In overseas markets, the net long position ratio of COMEX gold management funds dropped from 29% to 13% (before April), and rebounded to 20% after May, but the total position continued to shrink.
This reflects that the bull market in gold has moved from the “body” to the “tail”, with institutions reducing their holdings at high prices and followers passively exiting the market, leading to a technical break. However, the strategic direction of going long has not reversed.” Jin Guoqiang emphasized.
Strictly control risks and wait for opportunities at low prices
In the face of sharp fluctuations in gold prices, Jin Guoqiang, based on his experience in the futures market, has put forward four risk control suggestions: First, reduce leverage. In a high-level environment, prioritize reducing the leverage ratio of futures positions. The second is dynamic stop-loss to avoid the risk of settlement at maturity and set flexible stop-loss lines. Third, do not chase high prices. The gold price has failed to reach the peak of $3,500 three times. One needs to wait patiently for a pullback before making a move. Fourth, option protection: Those holding long positions in futures can use put options to hedge risks.
Jin Guoqiang said that the medium and long-term support logic for gold remains unchanged. The reasons are as follows: First, the process of de-dollarization is accelerating. Data shows that the share of the US dollar in global foreign exchange reserves has dropped from 58.5% in 2017 to 44.2% in the first quarter of 2025, while the share of gold has risen from 10% to 24% during the same period. The underlying driving force is the rising demand for currency diversification in emerging economies and the decline in the credit of US Treasuries (three major institutions have cancelled the AAA rating). The second is the deepening of the US debt crisis. The US debt-to-GDP ratio has reached 124% (the highest since World War II), and the Grand Beauty Act will add a deficit of 3.4 trillion US dollars. According to historical patterns, the price of gold rises on average for 6 to 12 months after a sovereign bond downgrade. The third is the latent risk of stagflation. The lagging effect of Trump’s tariff policy may become apparent in the third quarter. With imported inflation and a slowdown in economic growth, the anti-stagflation attribute of gold will be highlighted.
Despite short-term pressure, Jin Guoqiang remains firmly bullish on gold. He said that in the long term, the pace of de-dollarization has accelerated (the share of the US dollar in global foreign exchange reserves has dropped by 14% over the past eight years, while the share of gold has risen to 24%). In the medium term, the trade war may trigger imported inflation, and the risk of stagflation in the third quarter highlights the safe-haven attribute of gold. In the short term, the expiration of the tariff policy in August may once again trigger market volatility.
