I’ve been keeping a close eye on this gold rally. To be honest, on the surface it looks like it’s driven by the usual suspects—rate cuts, inflation, and geopolitical risks. But if you stop there, it’s hard to understand why gold prices have stayed so resilient, especially after multiple pullbacks, yet the market continues to push the bottom higher.

The key is that what fundamentally drives this gold bull market is a crack in the global credit system. The moment in 2022 when foreign exchange reserves were frozen broke the “contract” that sovereign assets are inviolable. Since then, central banks and institutional investors have started rethinking asset allocation. And because gold can’t be frozen unilaterally, it has become the most direct hedge against systemic risk.

Just look at the data. According to a report by the World Gold Council, in 2025 global net gold purchases by central banks will exceed 1,200 tons—marking the fourth consecutive year surpassing the 1,000-ton threshold. More importantly, 76% of surveyed central bank respondents believe that the proportion of gold will be increased over the next five years, while also expecting U.S. dollar reserves to decline. This isn’t short-term speculation; it’s a structural shift in asset allocation.

From the gold price trend, it’s clear that confidence in the U.S. dollar is adjusting over the long term. Central banks around the world continue to add to holdings. Uncertainty in tariff policies creates demand for hedging. And expectations of Federal Reserve rate cuts lower the cost of holding—when these factors pile up together, they form a pattern of “the bottom being raised higher and higher.” On top of that, global debt has already reached $307 trillion, which limits policy flexibility in many countries. With monetary policy forced to become even more accommodative, gold’s appeal is indirectly boosted as well.

But it’s important to make this clear: gold’s rise has never been a straight line. In 2025, as adjustments to Federal Reserve policy expectations led to a pullback, gold retreated by 10-15%. In early 2026, when real interest rates rebounded and the crisis eased, there was an even sharper correction of 18%. Heavy volatility is the norm, not the exception.

As for whether you should enter the market now, my view is: it depends on your positioning. If you’re a short-term trader, volatility tends to amplify significantly around the release of U.S. market data, and those periods do offer opportunities. But you must set strict stop-losses—risk control of 1-2% is the baseline. For beginners, don’t blindly follow the trend. Start with a small amount to “test the waters,” learn to read the economic calendar, and track the timing of U.S. economic data releases before making any move.

If you’re a long-term allocator, gold is indeed suitable as a diversification tool for your portfolio, but you need to be psychologically prepared to withstand drawdowns of 20% or more. Gold’s average annual swing is 19.4%, which is higher than the S&P 500’s 14.7%. Whether you can tolerate the interim fluctuations is something you need to think through first. Experienced investors may consider combining long- and short-term approaches: hold a core position long-term, and use satellite positions to trade in the short term during periods when volatility is high.

Regarding the future direction of gold prices, institutional forecasts are generally bullish, but the divergence is quite large. The consensus expects an average price in 2026 of $4,800 to $5,200 per ounce, with a year-end target price benchmark range of $5,400 to $5,800. In an optimistic scenario, it could reach $6,000 to $6,500, and some high-end forecasts even mention the possibility of $6,500 to $7,200. Goldman Sachs raised its year-end target from $5,400 to $5,700. JPMorgan expects to reach $6,300 in Q4. On average over the next six months, expects $5,800. Meanwhile, UBS projects a full-year average of $5,000 but a mid-year target of $6,200.

However, all of these forecasts rest on certain assumptions: the World Gold Council has explicitly stated that if economic growth slows and interest rates decline further, gold will rise moderately. But if policies successfully boost growth and the dollar strengthens, gold prices could also fall. So the 2026 outlook for gold prices looks more like “oscillating at high levels with an upward tilt,” rather than a one-way, uninterrupted rally.

My view is that central bank buying of gold reflects long-term doubts about the U.S. dollar system. Since this trend erupted in 2022, it hasn’t truly stopped—and it won’t suddenly disappear in 2026 either. Because sticky inflation, debt pressure, and geopolitical tensions are still there. Gold’s bear-market declines are limited, and the bull market’s momentum remains strong. But the crucial point is whether you have a system to monitor these factors—not whether you blindly chase the news. Go with the trend, clarify your positioning, and then decide how to enter.