Gold prices drop 30% in Q2, but gold ETFs continue to attract funds! Fund managers give the latest assessment

　　Source: Shell Finance

　　Gold prices have seen twists and turns this year.

　　On July 30, precious metal prices surged nearly 4% (UTC+8) in early trading, with multiple stocks rising against the trend. However, gains narrowed in the afternoon, and the precious metals index ended up with a slight increase of 0.97%.

　　On the news front, the Federal Reserve's July FOMC meeting concluded with an announcement to keep the benchmark interest rate unchanged at 3.50%-3.75%.

　　

　　In early trading on July 30, gold stocks strengthened and the precious metals index once surged 3.66% (UTC+8). Gains narrowed rapidly in the afternoon, ending up 0.97%.

　　In the early hours of July 30, UTC+8, the Federal Reserve announced at its July FOMC meeting that the benchmark interest rate would remain at 3.50%—3.75%. Cheng Shi, Chief Economist at ICBC International, believes that the Federal Reserve’s decision to maintain the federal funds target range at 3.50%-3.75% is in line with market expectations.

　　Cheng Shi pointed out that, before there is further confirmation that external cost pressures will spill over to core inflation and private sector expectations, the Federal Reserve's policy decision to maintain the current restrictive rate and wait for more data is a more risk-balanced approach. It is expected that the Fed will likely keep rates unchanged for the rest of the year.

　　Looking at a longer time frame, after reaching a high, gold faced a steep correction in the second quarter. In Q2, the international gold price, represented by London gold, fell about 14.17%, marking the largest quarterly decline since Q2 2013 and ending a five-quarter consecutive rise. Gold Au99.99, priced in RMB, fell about 13.73%, hitting a low of 860.02 yuan/gram during trading on June 30.

　　Due to this, the precious metals index also continued to decline after hitting a high in early January, dipping to a low of 126,377.39 points on July 1. However, since Q3, the index has rebounded, rising more than 20% within the month, reflecting a partial recovery of market sentiment.

　　Amid heightened volatility, some safe-haven funds continue to allocate gold assets through ETFs. Over the past month (June 30-July 29), ETF inflows have remained net positive, with strong interest in tech semiconductors, semiconductor materials, securities firms, and tech chips—each sector drawing between 10 billion and 40 billion yuan.

　　Gold-themed ETFs also stood out. The SSH Gold Stock ETF saw net inflows of 3.641 billion yuan over the past month, a year-on-year increase of 13.77%. Specifically, Huaxin Gold ETF absorbed nearly 4 billion yuan in the past month, with its latest scale reaching 91.286 billion yuan. Yongying CSI Shanghai-Hong Kong Gold ETF recorded over 400 million yuan of inflows in a day, with its latest size at 12.46 billion yuan. Gold’s appeal as a traditional safe-haven asset has once again been validated during times of market volatility.

　　

　　Overall, in Q2 2026, the global macro environment remains complex and volatile, and gold experienced a three-phase move: a rebound, followed by a slow drop, then a sharp fall.

　　Zhao Ziheng of China Europe Fund stated in the Q2 report that, in terms of investment strategy, the duration attribute of gold equities means they show asymmetrically high elasticity at both ends of the interest rate cycle. In Q2, market expectations for monetary policy shifted from “rate cut trades” to “longer higher rates.” The high duration of gold equities was magnified on the downside, resulting in a 30% deep retracement.

　　Looking ahead, Zhao Ziheng noted that the gold sector’s fate still hinges on whether real interest rates have peaked and reversed. By the end of Q2, there are two key threads to track: first, if the inflection point for real rates is confirmed (should the intra-quarter high of 2.29% prove to be the top), the valuation correction for gold may be over; second, whether market expectations for rate hikes can cool off—if subsequent inflation data falls and rate hike expectations recede, this will be the first signal for a gold rebound.

　　From a longer-term view, Zhao Ziheng believes that the “integral” of US credit risk—expanding fiscal deficits, de-dollarization trend, and geopolitical uncertainty—always forms the value foundation of gold. It was only in Q2 that this was suppressed by strong real interest rates and took a back seat; once it retakes market focus, it could provide strong foundational support for gold.

　　However, he also cautioned that if new supply shocks arise (e.g., renewed geopolitical or energy supply disruptions), the nature of rate hikes could again shift from “calm” to “forced,” possibly causing both equities and gold to fall simultaneously. Before there is a clear inflection in real rates, it is advisable to treat the gold sector with a valuation-repair and rebound mindset, rather than prematurely calling it a trend reversal.

　　Liang Pusen and Kong Fang of Qianhai Open Source Fund wrote in the Q2 report that after hitting record highs in Q1, gold experienced continual corrections, as the multiple factors supporting gold’s prior rise faced challenges to varying degrees in Q2. However, this situation is expected to improve in Q3. In the medium to long term, the backdrop of global geopolitical and economic reordering has not changed. Major countries continue to use fiscal expansion and monetary coordination to drive economic growth and address imbalances. Amid concerns over debt and currency instability, gold—as a hard currency—will likely continue to play an important role in asset allocation.

　　“In general, short-term gold performance is hampered by hawkish Fed expectations, rising volatility, and capital outflows. But the core medium- to long-term values of hedging inflation and global currency/geopolitical uncertainties remain unchanged,” said Liang Pusen and Kong Fang. They recommend that investors, from the perspective of long-term asset allocation, increase their attention to gold in the third quarter and use it as a tool to optimize portfolio volatility and hedge systemic risks with long-term positions.

Editor: Zhu Henan