Recently, gold prices have been hitting new highs, and many people around me are asking about the reasons behind the rise and fall of gold. I took some time to analyze and found that the logic behind this rally is actually quite clear, not just about surface-level interest rate cuts or inflation.

To be honest, what drives continuous increases in gold is never just short-term factors. The real foundation for pushing gold prices higher comes from some long-term structural changes—especially the global reassessment of the US dollar’s creditworthiness. The foreign exchange reserve freeze event in 2022 truly shattered many people's confidence in sovereign assets' safety. As the only asset that cannot be unilaterally frozen, gold’s appeal has significantly increased.

Central bank actions best illustrate the issue. According to the World Gold Council, by 2025, global central banks will have net purchased over 1,200 tons of gold, marking the fourth consecutive year of buying over a thousand tons. Even more interestingly, 76% of surveyed central banks believe they will increase their gold holdings over the next five years, while also expecting US dollar reserves to decline. This is not short-term speculation but a systematic adjustment of asset allocation by countries. Among the reasons for gold’s rise and fall, central bank continuous buying is definitely the strongest support.

Besides these structural forces, some volatility factors are also creating short-term fluctuations. Trade protectionism and uncertainty around tariffs directly boost safe-haven demand. Expectations of Federal Reserve rate cuts also play a role—lower interest rates reduce the opportunity cost of holding gold and weaken the dollar. Geopolitical risks have also persisted; as long as conflicts and tensions remain worldwide, the risk premium for gold as a safe haven will be hard to fully dissipate.

Of course, this rally also reflects some deeper issues. The total global debt has reached $307 trillion, and high debt levels mean limited policy flexibility for countries. Monetary policies tend to be accommodative, and real interest rates are suppressed. Stock markets are already at historic highs, with few market leaders, concentrated risks, and many people holding gold for portfolio stability. Continuous media coverage and social sentiment also drive short-term capital inflows, accelerating the rally.

When discussing the reasons for gold’s rise and fall, one angle often overlooked is the change in investment methods. More and more people are no longer satisfied with static allocations but want to adjust their positions flexibly. The surge in interest in trading tools like XAU/USD reflects this shift. It increases liquidity and responsiveness but also means gold prices react faster to macro signals, with more volatility.

The current question is, can you still buy? My view is that there are still opportunities, but it depends on what type of investor you are. If you are a short-term trader, the volatile market indeed offers many trading opportunities, especially around US economic data releases. But you must set strict stop-losses—risk control within 1-2% is crucial.

If you are a beginner, don’t rush to heavily allocate right away. Start with small amounts, learn to read economic calendars, track US economic data, and use these to inform your trading decisions. Gold’s annual amplitude is 19.4%, higher than the S&P 500’s 14.7%, so its volatility should not be underestimated. If you are a long-term investor, gold is indeed suitable as a diversification tool for your portfolio, but be prepared for a drawdown of over 20%.

Experienced investors can consider a combination of long-term and short-term strategies—holding core positions long-term while using volatility for short-term trades. Especially around major data releases, volatility tends to increase, providing more trading opportunities. But this requires strong risk management skills.

Institutional forecasts suggest that gold will remain bullish overall into 2026. Goldman Sachs has raised its year-end target from $5,400 to $5,700, JPMorgan expects it to reach $6,300 in Q4, and Citibank’s average forecast for the second half is around $5,800. The World Gold Council and the London Bullion Market Association consensus is about $5,100 on average for the year. However, it’s important to note that these forecasts vary, and 2026 is more likely to be characterized by “high-level oscillation with an upward bias,” rather than a continuous, one-way rally.

Finally, I want to emphasize that understanding the deeper logic behind gold’s rise and fall is more important than short-term price predictions. The trend of central bank gold purchases has not truly stopped since the outbreak in 2022, indicating long-term doubts about the US dollar system. Persistent inflation, debt pressures, and geopolitical tensions still exist, so the bottom for gold will keep rising, with limited downside in a bear market. But remember, gold’s rally is never straight up; in 2025, it retraced 10-15% due to Federal Reserve policy adjustments, and earlier this year, when real interest rates rebounded, it experienced an 18% sharp correction. The key is whether you have a systematic way to monitor these changes rather than blindly following the trend.