This article explains the underlying logic of the "gold price surge".

Author: Nathan Ma, Co-founder of DMZ Finance

When gold prices break through $4,000 per ounce in 2025, many people will realize that this asset, considered "conservative," is undergoing a stunning surge.

Gold Price Trends and Annual Returns from 2001 to 2025: A review of historical data clearly shows the upward trajectory of gold.

Gold Price Accelerated Upward Trend from 2019 to 2025

Focusing on the data starting from 2019, it's easy to see that from $1,500 in 2019 to $4,000 in 2025, the compound annual return exceeds 18%, far surpassing most traditional asset classes.

This surge is not accidental, but rather the inevitable result of the combined effect of four core factors.

This upward trend is not accidental, but rather the inevitable result of the combined effect of four core factors.

I. 2019 - Institutional Change: Basel III Redefines the Value of Gold The turning point in gold's fate began with an international banking regulatory document called "Basel III." This regulatory framework, introduced after the 2008 financial crisis, was fully implemented in major economies around 2019. Its core objective is clear: to ensure that banks hold sufficient high-quality capital to withstand risks. It is under this new set of regulations that gold's status has fundamentally changed. In the old regulatory framework, gold was classified as a "Tier 3 asset"—banks had to pay expensive capital costs to hold gold. This millennia-old metal had become a burden in the modern financial system. However, Basel III made a revolutionary decision: formally setting the risk weight of physical gold to zero. This means that in banks' risk assessments, gold is now on the same level as cash and top-tier sovereign debt. This change directly lowers the cost for banks to hold gold, prompting them to include it in their portfolios of high-quality liquid assets. Gold has returned to the center of the financial system, laying the institutional foundation for subsequent price increases. II. 2022 - The Russia-Ukraine War: The De-dollarization Wave Triggered by the $300 Billion Freeze If Basel III in 2019 paved the way for gold price increases, then the Russia-Ukraine war in 2022 directly ignited the engine. The freezing of approximately $300 billion of Russia's foreign exchange reserves allowed the world to witness another form of "credit" collapse—even sovereign bonds and deposits backed by sovereign credit can disappear overnight in the face of political risk. This event has prompted central banks worldwide to re-examine the safety of their reserve assets. According to data from the International Monetary Fund, the US dollar's share of global foreign exchange reserves has fallen from 72% in 2000 to 58% in 2025, a near 30-year low. Meanwhile, over 20% of central banks indicated in 2024 that they would continue to increase their gold holdings over the next two years. This trend is evident globally. The Reserve Bank of India increased its gold holdings by over 200 tons between 2023 and 2025, raising its gold reserve share to 8%; the Central Bank of Poland increased its holdings by approximately 130 tons during the same period, stating that "geopolitical risks are a key factor in the decision to increase holdings"; and the Monetary Authority of Singapore also announced in 2024 that it would increase its gold reserves by 15% to enhance the resilience of the financial system. These actions by central banks signify a profound restructuring of reserve assets globally. As sovereign credit risks emerge, gold, requiring no counterparty commitment, is becoming an inevitable choice for central banks in the new geopolitical environment. The surge in gold prices also reflects the dilution of the purchasing power of fiat currencies, especially the US dollar. Theoretically, as a scarce physical asset, gold can serve as a hedge against inflation to some extent. When governments issue large amounts of currency, leading to a decline in purchasing power, gold, due to its inherent scarcity, can be priced in more monetary units. During the three years of the pandemic, major central banks worldwide implemented unprecedented monetary easing policies. The Federal Reserve's balance sheet expanded dramatically from approximately $4 trillion at the beginning of 2020 to nearly $9 trillion at its peak in 2022, an increase of over 125%. Meanwhile, the US M2 money supply surged from $15 trillion to $21 trillion between 2020 and 2022, an increase of over 40%, the fastest monetary growth since World War II. Looking back at history, while gold's performance as an inflation hedge has not always been effective, it has indeed played a significant role in specific periods. Throughout the 1970s, the US suffered from stagflation, with the CPI rising by an average of 7.1% annually. During the same period, the price of gold soared from approximately $35 per ounce in 1970 to a high of approximately $670 per ounce in 1980, an increase of over 1800%. From 2021 to 2023, supply chain bottlenecks following the COVID-19 pandemic and large-scale fiscal stimulus pushed up global inflation. The US CPI reached a 40-year high of 9.1% in June 2022. Despite the pressure on gold prices from the Federal Reserve's rapid interest rate hikes, the high-inflation environment still provided significant support for gold. Data shows that since 2000, the real purchasing power of the US dollar has declined by approximately 40%. This long-term value dilution has forced investors seeking to preserve value to look for alternatives beyond the dollar's creditworthiness. IV. China's Reserve Restructuring: A Strategic Adjustment by Global Central Banks China's foreign exchange reserve management strategy is becoming a crucial variable influencing the gold market. Compared to the end of 2019, China's foreign exchange reserves structure shows a clear trend of "reducing debt and increasing gold": holdings of US Treasury bonds decreased from $1.0699 trillion to $0.7307 trillion (as of July 2025), a net decrease of $339.2 billion, or -31.7%; while official gold reserves increased from 1,948 tons to 2,303.5 tons (as of September 2025), a net increase of 355 tons, or +18.2%. Behind this decrease and increase lies a profound strategic consideration by the People's Bank of China. China's foreign exchange reserves are enormous, but behind this massive reserve lies a structural change in asset allocation—a moderate reduction in US Treasury bonds and a steady increase in gold holdings. As of the end of September 2025, gold accounted for only 7.7% of China's official international reserve assets, significantly lower than the global average of around 15%. This means that the People's Bank of China still has ample room to continue increasing its gold holdings. This trend is not unique to China. According to data from the World Gold Council, global central bank gold purchases have continued to surge since reaching a record high of 1,136 tons in 2022. The market generally expects that in 2026, central bank net gold purchases will remain above 1,000 tons for the fifth consecutive year, a historical high. Russia, which transitioned from a net gold exporter to a net importer in 2006, has seen its gold reserves continuously increase. Behind the gold-buying spree by central banks worldwide lies a profound strategic consideration: gold, as a globally accepted means of final payment, can enhance the credit of sovereign currencies and create favorable conditions for promoting currency internationalization. V. Future Outlook: The Logical Support for Gold's Tenfold Appreciation in the Next 10-15 Years. Based on current fundamental analysis, it is not a pipe dream for gold to achieve a tenfold appreciation in the next 10-15 years. This judgment is based on the following core logic: First, the global central bank "de-dollarization" process has just begun. Currently, the US dollar still accounts for nearly 60% of global foreign exchange reserves, while gold accounts for only about 15%. If this ratio is rebalanced in the next decade, central bank gold purchases alone will bring trillions of dollars in capital inflows to the gold market. Secondly, the continued expansion of global money supply contrasts sharply with the limited growth of gold reserves. Over the past two decades, the M2 money supply of major global economies has increased nearly fivefold, while the average annual growth rate of gold reserves has been less than 2%. This supply-demand imbalance will continue to support rising gold prices in the long term. Thirdly, the normalization of geopolitical risks will further highlight gold's safe-haven attributes. During the transition period when the dollar's credibility is damaged and emerging reserve currencies are not yet mature, the value of gold as a neutral reserve asset will be further reassessed. Conclusion: Seizing a Historic Opportunity The surge in gold prices is not driven by a single factor, but is the result of the combined effect of four core factors: institutional reform, geopolitics, excessive money supply, and reserve restructuring. Looking ahead, several institutions, including Goldman Sachs, hold optimistic expectations for gold prices. Goldman Sachs has even raised its December 2026 gold price forecast to $4,900 per ounce. "Gold is money; everything else is just credit." In today's world where the value of fiat currencies is being tested, gold provides a wealth guarantee that has stood the test of millennia. A portfolio that allows one to sleep soundly is the true foundation for navigating economic cycles.