Gold Defense Battle: Investment Opportunities and Risks Behind the 5-Year Trend Chart

In the second half of 2024, the gold market is experiencing a spectacular surge. After reaching a historic high of $4,400 per ounce in October and then pulling back slightly, it remains volatile at high levels into the end of the year. Investors worldwide are asking the same question: Will this rally continue? Is it too late to enter now?

To answer these questions, one must look beyond short-term price fluctuations and understand the systemic factors driving gold’s rise. When we review the gold price chart over the past five years, we find that the gains in 2024-2025 are extraordinary—approaching the highest levels in nearly 30 years, surpassing the 31% in 2007 and 29% in 2010. This is not a coincidence but the result of multiple forces at play.

Global Central Bank Attitudes Shift: A New Era for Gold Reserves

First, let’s examine changes at the central bank level. According to data from the World Gold Council (WGC), in Q3 2024, global central banks net purchased 220 tons of gold, a 28% increase quarter-over-quarter. The total gold purchases in the first nine months reached approximately 634 tons, slightly below the same period in 2023 but far exceeding other historical periods.

More noteworthy is the shift in central bank attitudes. In the June report of the central bank gold reserve survey by the WGC, 76% of surveyed central banks indicated they plan to “moderately or significantly increase” their gold holdings over the next five years, while most expect the “US dollar reserve ratio” to decline. This reflects a global re-evaluation of gold as the ultimate trust asset.

This systemic buying provides long-term support for gold prices, differing from short-term market sentiment-driven volatility.

Policy Uncertainty and Safe-Haven Demand Rise

Entering 2025, frequent changes in US tariffs have become a new market catalyst. Uncertainty about policy expectations directly fuels risk aversion, prompting investors to accelerate allocations into safe-haven assets like gold. Historical experience shows that during periods of policy turbulence, such as the US-China trade war in 2018, gold prices often surged 5–10% in the short term.

Meanwhile, slowing global economic growth, persistent inflation pressures, and the staggering $307 trillion in global debt further limit the room for interest rate adjustments. Countries tend to adopt more accommodative monetary policies, indirectly boosting demand for gold allocation.

The Complex Play of Fed Rate Cut Expectations

The Federal Reserve’s policy direction is a key variable influencing gold prices. Rate cuts weaken the US dollar and reduce the opportunity cost of holding gold, generally supporting higher gold prices. According to CME interest rate tools, the probability of a 25 basis point rate cut at the December meeting is 84.7%.

However, market reactions are not mechanical. After the September FOMC meeting, Powell characterized the rate cut as “risk management,” without signaling ongoing cuts, leading to a pullback in gold after an initial rally. This indicates that investors are cautious about future policy moves.

Looking at the five-year historical chart of gold, real interest rates and gold prices show a clear negative correlation—when rates fall, gold rises; when rates rise, gold faces pressure. Real-time data from FedWatch has become an important reference for many traders in judging short-term gold direction.

Geopolitical Risks and Sentiment Amplify

Ongoing conflicts such as the Russia-Ukraine war and tensions in the Middle East continue to enhance gold’s safe-haven appeal. Additionally, media reports and social sentiment further accelerate short-term capital inflows, reinforcing market optimism amid the rally.

These factors combined lead to short-term gold price volatility that far exceeds that of stocks, with an average annual amplitude of 19.4%, higher than the S&P 500’s 14.7%.

Institutional Forecasts Signal Long-Term Optimism

Despite recent fluctuations, mainstream financial institutions remain optimistic about gold’s outlook:

• J.P. Morgan’s commodities team considers this correction a “healthy pullback” and has raised its Q4 2026 target price to $5,055 per ounce.
• Goldman Sachs reaffirms its end-2026 target at $4,900 per ounce.
• Bank of America updates its target to $5,000, with strategists even suggesting a potential surge to $6,000 next year.

On the retail side, chain brands like Chow Tai Fook and Luk Fook Jewelry maintain reference prices for pure gold jewelry above 1,100 TWD/gram, with no significant decline, reflecting market confidence in gold’s value.

The Real Dilemma for Investors: When to Act

Understanding these logical factors makes practical decision-making clearer. The key is to tailor strategies according to your own situation:

For experienced short-term traders, the current volatility offers ample trading opportunities. Liquidity is high, and price directions are relatively predictable, especially during sharp swings, where bullish and bearish forces are clear. Monitoring economic calendar releases and market reactions around US data announcements can help capture short-term opportunities.

For novice investors, caution is essential. Blindly chasing highs often leads to traps—buying at peaks and selling at lows—resulting in losses. It’s advisable to start with small positions, gradually gaining experience, and avoid over-leveraging.

For long-term allocators, mental preparation is necessary. While gold remains a long-term bullish asset, it can experience intense fluctuations, even sharp corrections. The past five years show that even in an overall upward trend, annual volatility can reach 20–30%. Physical gold trading costs are also relatively high (5%-20%), so thorough evaluation before purchasing is recommended.

A potentially optimal approach is a hybrid allocation: maintaining long-term holdings while actively trading short-term price movements, especially around US market data releases. This requires good risk management skills and market sensitivity.

Final Reminder

Gold has a long cycle, and realizing investment returns typically requires patience of 10 years or more. However, during that period, extreme events like doubling or halving are possible. It’s not advisable to concentrate all funds in a single asset; diversification remains the prudent approach. For Taiwanese investors trading gold priced in USD, currency fluctuations between USD/TWD also impact actual returns.

The current rally in gold has not yet ended, but whether to enter and how to do so depends on honest assessment of your own risk tolerance.