I've been thinking about the essence of this recent gold rally. On the surface, it seems driven by rate cuts, inflation, and geopolitical risks, but digging deeper, it actually reflects cracks in the global credit system.

That pivotal moment in 2022 was crucial. When foreign exchange reserves were frozen, the market suddenly realized— the US dollar is no longer an absolute safe haven. Since then, gold has shifted from just a tool to hedge against inflation to a long-term hedge against the entire financial system. Central bank actions best illustrate this. Last year, global central banks purchased over 1,200 tons of gold, marking the fourth consecutive year exceeding 1,000 tons. Moreover, 76% of central banks said they plan to increase their gold holdings over the next five years while reducing dollar reserves. This isn’t short-term speculation; it’s a structural shift.

Of course, gold’s price movements have never been straight upward. Early this year, due to a rebound in real interest rates and easing crises, gold prices retraced 18%, with quite volatile swings. Expectations of Fed rate cuts, uncertainties around tariffs, and geopolitical tensions—these all caused short-term fluctuations. But on a five- or ten-year horizon, the lows are gradually rising, which is the most important signal.

According to institutional forecasts, by the end of this year, target prices generally range from $5,400 to $5,800, with optimistic scenarios reaching $6,000 to $6,500. Goldman Sachs raised its target to $5,700, JPMorgan expects $6,300 in Q4, and UBS believes it could hit $6,200 by mid-year. Of course, there are differences among these forecasts, but the bullish bias is clear.

But honestly, can you still participate in gold now? The answer is yes, but you need to think carefully about your role. If you’re a short-term trader, the volatility around U.S. market data releases presents opportunities, but strict stop-losses are essential. If you’re a beginner, start with small amounts to test the waters—don’t blindly add more, or your psychology could break down, and that would be painful. If you’re a long-term investor, gold is suitable as a hedge in your portfolio, but be prepared for a drawdown of over 20%—gold’s volatility isn’t much lower than stocks.

My view is that the future trend of gold depends on how you view the global credit system. If you believe the dollar system will gradually weaken, central banks will continue to increase gold holdings, and geopolitical risks will persist, then the long-term trend for gold is upward, albeit with intense fluctuations along the way. The key is to establish a clear analytical framework—monitor central bank gold purchases, real interest rate changes, and geopolitical developments—rather than chasing news blindly.

Go with the flow, understand your position clearly, and then decide how to enter the market. This gold rally presents opportunities, but only if you understand why it’s rising, not just because others are making money and you want to join in.