Today, spot gold has risen above 4620 USD/ounce, with an intraday increase of over 2%. Social media is once again flooded with the "king of safe havens" returning. However, as an old player who has been in the crypto space for several years, I must remind everyone to stay calm—there are three layers of logic behind this wave of market movement, and novices are most likely to only see the first layer.
The first layer is the geopolitical situation. The Middle East is engulfed in war, shipping in the Strait of Hormuz is obstructed, and international oil prices have surged, textbook-style "when the cannon fires, gold will be worth thousands." But paradoxically, in mid-March, gold experienced a weekly drop of over 10%, the largest drop in 43 years. Safe-haven sentiment does not increase linearly, and chasing highs when news reverses is the most dangerous.
The second layer is the Fed's stance. Interest rates are held in the 3.50%-3.75% range, and expectations for multiple rate cuts this year have been ruled out. Powell's underlying message is clear: unanchored inflation expectations are scarier than supply shocks. In a high-interest environment, the opportunity cost of holding gold is always present; this isn't the zero-interest era of 2020 anymore.
The third layer is crucial—central bank gold purchases. Global central banks have been increasing their holdings for 13 consecutive months, with gold prices projected to rise 60% by 2025. This is the real long-term support, but it's tough for regular investors to track central bank movements and they can easily mistake short-term volatility for long-term trends.
When it comes to crypto asset allocation, gold and digital assets aren't mutually exclusive. Institutions recommend a 10%-15% allocation to gold, while the remainder can be diversified across different sectors. But remember, never go all-in on a single narrative. Geopolitical risks act as catalysts, not fundamentals.
Do you think gold will continue to rally, or do you see a greater risk of a pullback? In an environment with high inflation expectations, how are you allocating your positions?
