Hexun Investment Advisor Wu Zhikai: Gold's short- to medium-term bubble squeezing, the long-term bull market fundamentals remain unchanged

Next week, gold is likely to continue to fall. Let’s first look at an extremely unusual market signal: today, Brent crude oil has approached $99 per barrel, and geopolitical risks in the Middle East remain high. According to traditional logic, risk-averse sentiment should push up gold prices. However, the reality is that international gold prices are firmly stuck around $4,500, showing weak upward momentum. Why has the logic of “buying gold in chaotic times” failed recently?

Let’s examine the core data. Many people think that the recent surge in gold prices is due to central banks buying, but the latest report from the World Gold Council shows that last year, global central banks had net purchases of 863 tons of gold, while the inflow of funds into global gold ETFs reached a record 801 tons. This indicates that the core force pushing gold prices to the historical high of $5,598 is retail investors chasing prices and short-term speculative money. When the market becomes extremely crowded, risks begin to brew. From the peak in January, gold has experienced a maximum drawdown of over 20%, officially entering a bear market territory from a technical perspective. In financial markets, when panic spreads, gold often loses its safe-haven aura and becomes an asset for institutions to replenish liquidity. The previously high-leverage long positions are currently facing enormous margin call pressures, and once key support levels are breached, the selling pressure from forced liquidations will further be released.

So, can we bottom out now? My advice is: stay calm, watch more, act less. From a long-term perspective, as long as dollar credit continues to diminish, the foundation for a bull market in gold remains. Institutions like Goldman Sachs are still optimistic about gold rising to $5,400 by the end of the year. However, in the short to medium term, the market must undergo a painful period of bubble deflation and deleveraging. Investing is not about who operates more, but about who lasts longer. Once this wave of panic is completely cleared, the true long-term hitting zone will emerge.

(Author: Zhang Yan)

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