I've been thinking about the logic behind this recent gold rally, and I realize many people are actually getting it wrong. Everyone tends to think that gold prices are simply a function of inflation and interest rates, but in reality, it's much more complex.

What truly drives gold higher is never just inflation or short-term panic, but long-term structural factors that can shake the foundation of the dollar's credibility. The 2022 foreign exchange reserve freezing incident directly shattered the consensus that "sovereign assets are inviolable." Since then, gold's status as the only "ultimate store of value" that cannot be unilaterally frozen has changed.

Looking at central bank actions makes this clear. According to the World Gold Council, by 2025, global central banks' net gold purchases 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 also anticipating a decline in dollar reserves. This is not short-term speculation but a long-term signal of adjustments in the global financial system.

Of course, gold prices are also influenced by many short-term factors. Last year, frequent changes in tariffs created a lot of uncertainty, causing market funds to flow heavily into safe-haven assets. Expectations of Federal Reserve rate cuts also boosted gold's appeal—cutting rates lowers the opportunity cost of holding gold, and the dollar may weaken. Geopolitical risks persist; as long as global tensions remain high, gold will find it hard to fully shed its safe-haven premium.

Another often overlooked point: global debt has reached $307 trillion. This figure means that the policy space for central banks worldwide is shrinking, ultimately forcing them toward easing policies, further lowering real interest rates. Stock markets are already at all-time highs, increasing concentration risk in investment portfolios. Against this backdrop, many investors hold gold mainly for portfolio stability.

Media reports and social sentiment also fuel the trend. Continuous news bombardment and community discussions lead to large short-term capital inflows into gold markets at any cost. Plus, investors are increasingly inclined toward active trading rather than static allocations, causing trading volumes of tools like XAU/USD to surge, which further accelerates price responsiveness.

When observing gold price movements, I tend to use three reference points: first, the all-in sustaining cost (AISC) of global mining—this is the price floor; second, historical percentiles—current nominal gold prices have broken previous highs, but after adjusting for inflation, real gold prices still have room below the 1980 peak; third, central bank gold purchase data, especially the behavior of major buyers like China and India.

Regarding gold prices in 2026, forecasts vary significantly. Goldman Sachs raised its year-end target from $5,400 to $5,700, citing ongoing central bank buying and surge in safe-haven demand. JPMorgan expects $6,300 in Q4. UBS projects an average price of $5,000 for the year. Participants in the World Gold Council currently expect an average of about $5,100. If geopolitical crises escalate or the dollar depreciates sharply, gold could even reach $6,500 to $7,200.

But one thing to recognize: the 2026 gold price trend is more like "high-level oscillation with an upward bias," rather than a relentless one-way rally. In 2025, due to adjustments in Fed policy expectations, prices retreated 10-15%, with even an 18% sharp correction at the start of the year, showing considerable volatility.

As for whether now is a good time to buy, I think there’s opportunity, but it depends on your positioning. Experienced short-term traders can find plenty of opportunities in the volatility, especially around U.S. economic data releases, where fluctuations tend to amplify. But strict stop-losses are essential.

For beginners, start with small amounts to test the waters—don’t blindly add positions. Learn to use economic calendars, track U.S. economic data release timings, which can greatly aid trading decisions.

Long-term investors should see gold as a portfolio diversification tool, but be prepared for a drawdown of over 20%. Gold volatility isn’t lower than stocks—its annual average amplitude is 19.4%, compared to the S&P 500’s 14.7%. Don’t put your entire wealth into it.

Experienced investors might consider a combination approach—holding core positions long-term, using volatile swings for short-term trades. But this requires strong risk management skills.

A few more points to note: gold’s cycle is very long. Buying it as a store of value requires a horizon of 10+ years, during which it can double or even be cut in half. Physical gold trading costs are high—5-20%, and frequent trading can eat into profits. ETFs or XAU/USD might be more flexible options.

Overall, central bank gold purchases reflect a long-term skepticism of the dollar system. This trend won’t suddenly disappear by 2026, as inflation remains sticky, debt pressures persist, and geopolitical tensions continue. The gold price bottom is rising, with limited downside in bear markets and strong momentum in bull markets. The key is whether you have a systematic approach to monitoring, rather than chasing headlines. Hong Kong investors should also consider HKD/USD exchange rate fluctuations, which can impact final returns. Follow the trend, clarify your positioning, and decide your entry strategy accordingly.