The price of gold has long been a barometer for global economic sentiment, investor confidence, and monetary stability. Recently, after reaching record highs in April 2025, gold prices have entered a correction phase—sparking renewed debate: Will gold keep rising? To answer this, we need to examine both short-term market dynamics and long-term structural shifts in the global financial system.
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The Recent Pullback: A Pause, Not a Reversal?
In early May 2025, international gold prices declined for the second consecutive week, dropping from a peak of $3,509.90 per ounce on April 22 to $3,367.97 by May 6—a roughly 4% correction. This pullback was driven by easing global trade tensions and stronger-than-expected U.S. nonfarm payroll data, which temporarily boosted risk appetite and strengthened the dollar.
Domestically, Chinese gold prices followed a "fall-then-rise" pattern during the Labor Day holiday. On May 1, major brands like Chow Tai Fook dropped their 24-karat gold prices to 998 yuan per gram, with Shenzhen’s water-beaded wholesale market seeing rates as low as 780 yuan. However, post-holiday international gains quickly reversed the trend—by May 6, retail prices rebounded to 1,025–1,026 yuan per gram.
This volatility raises questions about gold's near-term trajectory. Yet history reminds us that gold’s role extends far beyond short-term price swings.
A Historical Perspective: From Currency to Store of Value
Gold has served as money since at least China’s Xia Dynasty, over 4,000 years ago. For most of human history, gold was currency—not an asset that "rises" or "falls." The concept of fluctuating gold prices only emerged after the collapse of the Bretton Woods system in 1971, which ended the gold-backed dollar standard.
Since then, gold has traded freely against fiat currencies. Over the past 50 years, the U.S. dollar has lost approximately 97% of its value relative to gold—an average annual appreciation in gold of more than 7%. This long-term trend reflects one undeniable reality: fiat currency devaluation fuels gold’s upward trajectory.
With finite global reserves and rising extraction costs, new supply growth is limited. Meanwhile, central banks and governments continue expanding money supplies at unprecedented rates. These structural imbalances strongly support gold’s long-term appreciation.
Gold as a Strategic Asset: Why It Matters Now
Shifting Household Wealth Allocation
Chinese household wealth remains heavily concentrated in real estate—over 60% on average—despite four consecutive years of property price declines. As real estate loses its status as the primary "value reservoir," investors are seeking alternatives.
Enter gold.
Unlike complex financial instruments such as equities or insurance products, gold combines safety, liquidity, and simplicity—making it highly accessible to mainstream investors. With interest rates trending lower globally, gold’s lack of yield becomes less of a drawback, especially when compared to negative-yielding bonds.
Data confirms this shift: In Q1 2025, while gold jewelry demand fell 26.85%, investment-grade gold bar and coin sales surged 29.81%. This divergence underscores a growing focus on wealth preservation over consumption.
Underowned but Undervalued
Current estimates suggest the average Chinese person owns less than 10 grams of gold—well below the global average of around 20 grams. At today’s prices (roughly 1,000 yuan per gram), that translates to under $1,000 in gold per capita.
Compare this to average savings exceeding $10,000 per person and urban household net worth surpassing $420,000. Gold’s share of total household assets remains below 1%—a fraction of what it could be.
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This under-allocation points to significant latent demand. Even a modest increase in gold allocation—say, to just 3–5% of household portfolios—would drive massive inflows into physical and digital gold markets.
Short-Term Outlook: Expect Volatility Ahead
Despite strong fundamentals, gold does not generate income—it’s often described as a “zero-yield asset.” In theory, its price should grow roughly in line with broad money supply (M2) expansion over time.
Yet since early 2024, gold has surged over 60%, with a 20% jump in Q1 alone—far outpacing inflation and M2 growth. Much of this rally reflects speculative positioning and heightened避险 sentiment, not intrinsic value.
Analyst forecasts have shifted dramatically. In January 2025, the most bullish prediction among LBMA analysts was $2,925 per ounce. By April, J.P. Morgan projected an average of $3,675 by Q4 2025 and a potential breakout above $4,000 in mid-2026—levels that echo characteristics of asset bubbles.
When price momentum becomes self-reinforcing, markets enter what economist John Maynard Keynes called the “beauty contest”: traders aren’t betting on fundamentals but on what they believe others will think. At this stage, sentiment drives price, making corrections inevitable.
Without new geopolitical shocks or financial crises, gold is likely to experience multiple small pullbacks throughout the year, with overall performance stabilizing near M2 growth rates.
Why a Crash Is Unlikely: The Dollar’s Fragility
Historically, sharp declines in gold occurred due to:
- Rising real interest rates
- A stronger U.S. dollar
- Improved risk appetite (e.g., economic booms)
But these conditions rely on a stable, trusted dollar-based monetary system. Today, that foundation is cracking.
Even as U.S. Treasury yields hit 15-year highs in 2024–2025, gold continued rising—an inversion of the traditional negative correlation with real rates. Why? Because investors are now pricing in U.S. debt sustainability risks and long-term dollar credibility erosion, not just interest rate differentials.
As long as the U.S. runs large fiscal deficits and central banks remain tethered to government debt monetization, confidence in fiat anchors will weaken—keeping demand for hard assets like gold structurally elevated.
The Future: Gold in a Post-Dollar World
A full return to the gold standard is improbable—governments value monetary flexibility too much. Nor is gold the only option anymore: cryptocurrencies like Bitcoin are emerging as alternative stores of value.
If major central banks or sovereign wealth funds begin allocating meaningfully to digital assets, gold’s dominance could wane. However, until a new global credit anchor emerges—whether multi-currency baskets, digital reserve assets, or commodity-backed systems—gold will remain a critical hedge.
The future monetary system is likely to be multipolar or fragmented, not unipolar like today’s dollar hegemony. During such transitions, uncertainty reigns—and gold thrives.
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Frequently Asked Questions (FAQ)
Q: Is gold still a good investment in 2025?
A: Yes—especially as a long-term hedge against currency devaluation and systemic risk. While short-term volatility is expected, structural factors support sustained demand.
Q: What causes gold prices to fall?
A: Historically, rising real interest rates, strong dollar performance, and improved economic outlooks reduce gold’s appeal. However, current concerns about U.S. fiscal health limit these pressures.
Q: How much of my portfolio should be in gold?
A: Financial advisors often recommend 5–10% allocation for diversification. Currently, most Chinese households are well below this threshold.
Q: Can cryptocurrency replace gold?
A: While digital assets offer similar inflation-resistant properties, they lack gold’s centuries-long track record. For now, they complement rather than replace it.
Q: Will gold hit $4,000 per ounce?
A: Some institutions project this by mid-2026, but such levels depend on continued loss of confidence in fiat systems—not just inflation or rate cuts.
Q: Is physical gold better than ETFs or digital gold?
A: Physical gold offers maximum control and crisis resilience; ETFs and digital forms provide convenience and liquidity. Diversifying across formats may be optimal.
Final Thoughts
Gold isn’t just rising—it’s reasserting its role in a changing world order. Short-term corrections are normal and healthy. But beneath the noise lies a powerful truth: as trust in fiat systems erodes, demand for immutable value grows.
Whether through physical holdings, ETFs, or blockchain-based instruments, incorporating gold into your financial strategy isn’t speculation—it’s preparedness.