Central Bank Selling Gold? Long-term Logic Remains Unchanged — Seize the "Golden Opportunity" for Gold Allocation

Ask AI · How do geopolitical conflicts catalyze the logic behind gold’s long-term bull market?

In recent weeks, the gold market has gradually stabilized after experiencing sharp volatility. Gold prices have rebounded from their lows, and spot gold has risen above the $4,600 threshold. At present, the market stands at a crossroads between “geopolitical conflicts continuing to intensify” and “a gradual easing at the margin of liquidity shocks,” and the logic of gold’s volatility-repair has been further strengthened. Short-term pullbacks, in turn, provide a window for long-term allocations. You may consider opportunities in Gold ETF Cathay (518800) and Gold Stocks ETF Cathay (517400) to capture gold’s long-term prospects.

【A few central banks selling gold: Tactical “pushing problems to someone else” can’t change the strategic “gold-buying wave”】

Gold sales by a few central banks, such as Turkey, are a “passive FX exchange” behavior driven by short-term fiscal and exchange-rate pressures, not a reversal of the global central bank gold-buying logic.

The market’s reaction to reduced gold holdings by the central banks of Turkey and Russia has been overdone. Guolian Minsheng Securities analysis notes that this round of selling is highly “tactical.” First, a surge in oil prices has worsened Turkey’s current account, forcing the central bank to sell gold to stabilize the lira exchange rate. Second, Russia is “monetizing” in order to deal with conflict-related expenditures. This is a typical “shift one problem to cover another,” not a strategic bet on gold falling.

Source: Guolian Minsheng Securities Research Institute

The core contradiction is that in March, global central banks still net bought 14.7 tons of gold, and the eurozone even increased holdings by 43.1 tons in a single month. Historical patterns show that in periods of weakening U.S. dollar credibility (such as the 1970s and 2000s), gold selling by key central banks often fails to suppress gold prices; instead, after the selling wave ends, gold prices often see even larger gains. Therefore, the “tactical” de-risking by some emerging-market central banks is precisely providing a “gold-dip” entry window for medium- and long-term capital.

Source: Guolian Minsheng Securities Research Institute

【Nonfarm payrolls beat expectations: The “rate-hike” expectations “ice point” is already reached, with gold’s downside risk fully exhausted】

The strong March nonfarm payrolls data suppressed rate-cut expectations. However, the market’s pricing for “no rate cuts” and even “rate hikes” has already reached an “ice point,” leaving gold with little further downside pressure in the near term.

The U.S. added 178k jobs in March, and the unemployment rate fell to 4.3%. CICC Futures indicates that the CME Fed Watch shows the market’s expectations for rate cuts within the year have almost disappeared, and rate-cut expectations are at an “ice point.” This means the worst case for monetary tightening expectations has already been fully priced in.

More importantly, the key variable lies in “stagflation” transmission. East Securities Futures states that oil prices surged 17% week-on-week, which will quickly push up April CPI. Guoxin Securities also emphasized that once oil-price increases shift from a “sentiment shock” to “inflation reality,” the Federal Reserve will face a dilemma between “fighting inflation” and “preventing a downturn.” When recession pressure outweighs inflation concerns, the Fed may actually turn more dovish; at that time, falling real interest rates will open upside room for gold prices.

【Geopolitical protracted war: A catalyst for the “chronic bleeding” of dollar credibility】

Prolonged expectations for conflict between Iran and the U.S. are accelerating the “de-dollarization” process in emerging markets, strengthening the long-term bull-market logic for gold.

Trump’s escalating military threats against Iran make the conflict hard to end quickly. Guolian Minsheng Securities constructed a key transmission model: oil price supply shock → trade imbalance → depreciation of the domestic currency → central banks sell U.S. Treasuries / buy gold to preserve value. If the U.S. becomes stuck in a long-term Middle East conflict, its fiscal deficit will worsen further (the U.S. government debt leverage ratio has already exceeded 110%), which will accelerate the migration of global central banks’ foreign-exchange reserves from U.S. dollar assets toward gold.

Bank of China Securities’ view points out that the current macro environment is similar to the night before the oil-dollar system collapses in the 1970s. Once the trend of declining dollar credibility is established, it has a self-reinforcing effect. Central banks around the world increasing gold holdings is not a short-term action, but a long-term response to changes in the international monetary system.

【Gold ETF Cathay (518800), Gold Stocks ETF Cathay (517400) capture gold’s long-term opportunities】

The current gold market shows a pattern where “short-term pains” and “long-term certainty” coexist. In the short term, the aftereffects of liquidity shocks, the Federal Reserve’s wait-and-see stance, and repeated twists and turns in geopolitical negotiations will likely keep gold prices on a path of volatility searching for a bottom and slow repair. But in the medium term, accumulated “stagflation” risks, weakening dollar credibility, and the strategic gold-buying by global central banks have already built strong support for gold prices.

Gold, as a core instrument for hedging “currency depreciation” and U.S. dollar credit risk, has not had its long-term allocation value weakened by short-term adjustments. Based on historical experience, deep pullbacks during gold bull markets have often been windows for medium- and long-term allocations.

For gold investors, the underlying assets of Gold ETF Cathay (518800) correspond to physical gold. Gold reserves are stored in the vaults of the Shanghai Gold Exchange, and the NAV trend directly tracks gold prices.

There are many ways for investors to participate in gold investing, including physical gold, gold jewelry, gold bars, gold futures, gold ETFs, and more. Gold ETF Cathay (518800) currently has distinct advantages as an investment product. The reason is that in November of last year, the government introduced a new gold taxation policy. The core of the new policy states that when physical gold is extracted through the exchange, VAT must be paid; whereas for non-physical investment via Gold ETF Cathay (518800), the corresponding gold assets are also stored in the exchange vaults and do not require actual extraction, so VAT can be exempted.

Gold Stocks ETF Cathay (517400), as an instrument-type product designed to invest in the gold industry chain, combines both gold-price sensitivity and the liquidity advantages of the stock market. It is suitable for investors who want to participate in gold’s行情 through the equity market for phased allocations or medium- to long-term positioning.

For investors, the allocation window for the gold sector is opening between short-term volatility and long-term certainty. By positioning through Gold ETF Cathay (518800) and Gold Stocks ETF Cathay (517400), you can both capture trading opportunities catalyzed by short-term geopolitical conflicts and serve as a core product for long-term allocations to the gold industry chain.

Risk warning: Mentions of individual stocks are only for industry event analysis and do not constitute any recommendation or investment advice for any individual stock. Short-term gains or losses of indices are for reference only and do not represent their future performance, nor do they constitute any commitment or guarantee regarding fund performance. Viewpoints may change with changes in market conditions and do not constitute investment advice or a promise. Fund risk-return characteristics differ from one another. Investors should carefully read the fund’s legal documents, fully understand product components, risk grades, and the principles of profit distribution, choose products that match their own risk tolerance, and invest cautiously. For fund fee rates, please refer to the legal documents.

Daily Economic News