According to Jin10, Luo Zhiheng, Chief Economist at Yuekai Securities, asserts that the recent sharp decline in gold prices does not signify the end of a bull market but rather a deep correction within an upward trend. He highlights several factors that continue to support gold prices in the long term.
Firstly, the normalization of global geopolitical risks, exacerbated by U.S. President Donald Trump's foreign policy, has increased conflict frequency and intensified chain reactions, which are expected to weaken the credibility of the U.S. dollar continuously.
Secondly, the strong demand for gold from non-U.S. central banks remains robust, likely pushing the central price of gold higher. In this new geopolitical risk environment, increasing gold reserves has become a crucial strategy for non-U.S. central banks to mitigate sanction risks and enhance financial security. Emerging market central banks, in particular, are actively increasing their reserves, with significant room for growth.
Lastly, if global economic risks shift from inflation to stagnation, gold prices are expected to find support. The surge in global energy prices is directly eroding consumers' purchasing power and may lead to tighter monetary policies that suppress demand and curb inflation, potentially resulting in economic downturns or even recessions. In such a stagnation environment, the strategic value of gold is likely to become more pronounced.
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