I've been watching the gold market recently and realized that the logic behind this rally is much more complex than just surface-level interest rate cuts and inflation.

Many people simply attribute the rise in gold prices to risk aversion, but if you observe closely, you'll find that what drives this gold price movement is actually a fundamental adjustment in the global credit system. Especially the freezing of foreign exchange reserves in 2022, which shook a basic assumption—that sovereign assets are absolutely safe. Since then, gold, as the "ultimate store of value that cannot be unilaterally frozen," has completely changed its positioning.

Central bank actions best illustrate the issue. According to the World Gold Council, by 2025, global net gold purchases by central banks will exceed 1,200 tons, marking the fourth consecutive year surpassing a thousand tons. More importantly, 76% of surveyed central banks expect to increase their gold holdings over the next five years while reducing dollar reserves. This is not short-term speculation but a structural shift in asset allocation.

Looking at gold price trends, there have indeed been quite a few fluctuations recently. I noticed that earlier this year, due to rebound in real interest rates and easing crisis sentiment, gold retraced nearly 18%, leading many to question whether the bull market has ended. But if you look at the underlying logic, the structural factors supporting gold prices haven't disappeared—global debt remains high (IMF data shows $307 trillion), fiscal pressures persist in various countries, and geopolitical tensions haven't truly eased.

Regarding short-term fluctuations in gold prices, my personal observation is that factors like rate cut expectations, trade protectionism, and geopolitical risks create short-term pulses rather than trends themselves. Every time U.S. economic data is released, markets fluctuate wildly, but the real determinants are those slow-moving variables—the long-term decline in dollar confidence and the ongoing trend of central banks buying gold.

How do I view the current position of gold prices? I think it needs to be positioned using several coordinate systems. One is production costs—the sustaining costs of global mining set a hard floor for prices. Another is the historical percentile—current nominal gold prices have broken previous highs, but after adjusting for inflation, the real gold price still has room below the peak of 1980. The third is the trend of central bank gold purchases, which is a key signal for whether structural premiums are diminishing.

Regarding gold prices in 2026, major banks' forecasts vary widely. Goldman Sachs raised its year-end target from $5,400 to $5,700, and JPMorgan even predicts it could reach $6,300 in Q4, but some institutions are more conservative. My sense is that 2026 will be more like "high-level oscillation with an upward bias" rather than a one-way rally. Economic data, Fed policies, geopolitical events—any of these could trigger a 15-20% short-term correction, but the long-term trend should still be upward.

If you want to participate now, my advice is to clarify your positioning first. For short-term traders, the volatility around U.S. market data releases indeed offers many opportunities, but be sure to set strict stop-losses. If you're a beginner, don't blindly chase highs—start with small amounts to test the waters, and learning to read economic calendars is more important than anything else. For long-term investors, gold is indeed suitable as a diversification tool in a portfolio, but be prepared for a drawdown of over 20%—the annual average volatility of gold is 19.4%, not lower than stocks.

Finally, I want to say that the essence of a gold bull market is a long-term hedge against systemic risks. The trend of central bank gold buying has not truly stopped since it exploded in 2022, because inflation remains sticky, debt pressures persist, and geopolitical tensions continue. The gold price bottom keeps moving higher, with limited downside in bear markets and strong momentum in bull markets. But remember, rallies are never straight lines; the key is whether you have a systematic way to monitor rather than just follow news blindly.