Can you still buy gold after reaching a new all-time high? Why should you invest in gold from the perspectives of supply, demand, and policy

Gold has experienced an astonishing rally over the past year. Starting from October 2023, this traditional safe-haven asset has been on a steady upward trajectory, reaching $2,700 in 2024 and now surpassing the $4,000 mark. According to a survey of analysts by Reuters, the expected average price of gold in 2025 is around $3,400, with the potential to reach $4,275 in 2026. However, as prices continue to hit new records, investors are beginning to wonder: Is it still worth buying gold now? Should we enter the market at every pullback?

Why Can Gold Break Through $4,000? Core Logic Analysis

Gold itself does not generate interest, and its price fluctuations mainly depend on changes in supply and demand. The surge in demand is ultimately rooted in investors’ (including retail, corporate, financial institutions, and central banks) shaken confidence in traditional financial assets.

First: Excess global liquidity and intensified cash devaluation

Since 2020, the US has implemented unlimited quantitative easing, which alleviated domestic liquidity issues but pushed inflationary pressures worldwide. In 2022, aggressive rate hikes were enacted to combat soaring domestic prices. These series of actions caused significant adjustments in global bond markets, eroding the credit of the US dollar and US Treasuries. When investors lose confidence in cash and bonds, they naturally turn to traditional safe-haven assets like gold.

Second: Signals from the rise of cryptocurrencies like Bitcoin

Gold is not the only alternative. Bitcoin has broken through the $100,000 level, and even US leaders have stated it should be part of strategic reserves. The soaring prices of these cash substitutes reflect a short-term crisis of trust in the dollar. Coupled with frequent geopolitical conflicts worldwide, the demand for safe assets has surged further, boosting gold purchases.

Third: Changes in banking capital rules

The latest revisions to Basel accords reclassify gold from Tier 3 capital to Tier 1 capital, on par with government bonds and cash. This significantly enhances gold’s liquidity rating. As gold mining costs rise annually and supply remains limited, compared to the continuously printed paper money, gold’s ability to preserve value is stronger. This regulatory adjustment directly incentivizes global banking systems to increase gold reserves.

Therefore, the rise in gold prices is not a fleeting trend but the result of multiple fundamental factors stacking up. As long as global economic uncertainties and geopolitical risks persist, gold remains an attractive long-term investment.

Is Now a Good Time to Enter? Risks and Opportunities Coexist

Gold still holds investment value, especially in an environment of a weakening dollar and expectations of rate cuts. Trillions of dollars are flowing out of currency markets, and gold’s status as a “first-class asset” will continue to strengthen.

However, it’s important to recognize that gold will not rise infinitely, and timing entries becomes increasingly crucial.

New Competition for Gold

Traditionally, bonds are the main competitors. With easing policies, more funds will flow into bond markets. But now, gold also faces competition from Bitcoin. If policies tilt to make cryptocurrencies part of official strategic reserves, capital flows will be unavoidable.

Short-term Outlook: Slower Gains, Increased Volatility

We predict that gold will continue to trend upward in the medium to long term, but the pace of growth will slow. Meanwhile, with more substitutes and a more diverse market participation, short-term volatility may increase. This demands more precise timing for entry.

Gold vs. Bitcoin: Which to Choose?

Over the past year, Bitcoin’s gains far outpaced gold, but its volatility is also much higher. If you are a conservative investor, gold remains a more stable choice. Bitcoin suits aggressive investors, while gold is better for those seeking stability. You can allocate based on your risk tolerance.

When Is the Best Time to Buy Gold? Technical Indicators Tell You

Investing in gold should not be blindly following the rally but waiting for pullbacks. The best strategy is to enter during increased safe-haven demand or when monetary policies are easing, combined with technical signals for precise timing.

Pullbacks Are a Gift for Gold Investors

Gold prices do not rise in a straight line. Smart investors will buy in stages during price retracements to accumulate positions at lower costs and harvest profits during rebounds.

Technical Analysis: Bollinger Bands as Your Entry Map

From a technical perspective, gold is still in an upward channel. Using Bollinger Bands can help identify clear entry and exit points, as well as stop-loss and take-profit zones. When gold approaches the lower band, it signals a relatively low entry point. Operating along the upper and lower bands can effectively avoid the risk of chasing highs.

Key Advice

Unless the US enforces political measures to compel central banks to increase US Treasuries holdings, based on current economic patterns, as long as gold prices fall to the lower Bollinger Band, it is an ideal entry point for long-term investors.

How to Participate in Gold Investment at Low Cost?

There are many tools for investing in gold. Choosing the right one can significantly reduce costs.

Physical Gold: Low Liquidity, High Costs

Gold bars and jewelry are tangible but have large bid-ask spreads, poor liquidity, and storage costs. For retail investors, physical gold has limited value. Only institutions like central banks with professional vaults can hold it reasonably.

Futures and Options: High Barriers and Complexity

Gold futures have good liquidity but require high margin deposits, making capital utilization inefficient. Gold options have nonlinear payoffs, making profits difficult. Both are less suitable for retail investors.

CFD Contracts: Simple, Flexible, Cost-Effective

Gold CFDs are derivatives tracking spot gold prices, allowing leveraged trading based on price movements. Their advantages include straightforward trading processes, no need for frequent rollovers like futures, and less complexity than options. They are the lowest-cost, most convenient way to participate.

Who Should Invest in Gold? Is It a Good Idea?

Gold is not only a currency and a commodity but also a major asset class, so it is valuable for central banks and individual retail investors alike.

Central Banks’ Logic: Hedge against inflation, strategic reserve. Gold has stood the test of history and remains a long-term favorite of official reserves.

Hedge Funds’ Logic: Gold has low correlation with other major assets, helping to smooth portfolio volatility and serve as a risk management tool.

Retail Investors’ Logic: Need for diversification. Proper allocation of gold can hedge inflation and contribute to long-term asset growth.

Therefore, all types of investors are suitable for participation, but their purposes, perspectives, and holding periods differ, so they should choose tools that best match their own situations.

Summary

Gold reaching a new high of $4,000 is not a fleeting phenomenon but the result of multiple factors such as excessive global liquidity, policy adjustments, and geopolitical risks. From a fundamental perspective, gold still has upside potential in the medium to long term; technically, entering near the lower Bollinger Band minimizes risk. Is investing in gold a good idea? The answer is yes, with the key being choosing the right timing and tools. For most retail investors, CFD contracts are the most cost-effective, flexible, and efficient way to participate in gold investment.