Gold Breaks Through $4000: When Is the Right Time to Buy Gold?

Gold prices remained at around $2,700 in October 2024, but within just a year, soared above $4,000, hitting a new all-time high. According to a survey of market analysts by Reuters, the average gold price for the full year of 2025 is expected to be around $3,400, with a potential breakthrough to $4,275 in 2026. Facing such a surge, the most pressing questions for investors are: Is it still a good time to enter the market? When is the right time to buy gold? Should short-term corrections be considered buying opportunities?

Why Did Gold Skyrocket? Three Major Drivers Supporting the Price Breakthrough

Gold itself does not generate interest income; its price fluctuations depend entirely on supply and demand. Changes in supply and demand are primarily driven by shifts in investor attitudes toward alternative assets—simply put, confidence in traditional fiat currencies and government bonds has wavered.

The Aftermath of the Federal Reserve’s Ultra-Loose Policies

Since 2020, the US has implemented unlimited quantitative easing to address domestic liquidity crises, but this has shifted the inflationary burden onto the global economy. By 2022, the situation worsened, prompting aggressive rate hikes to control inflation. This series of policy moves led to a significant devaluation of US debt and a decline in the creditworthiness of the dollar and US Treasuries. As traditional assets become less attractive, investors naturally turn to safe-haven assets like gold.

Rise of Alternative Assets like Bitcoin

Bitcoin has surpassed the $100,000 mark, with even the US President publicly stating it as a strategic reserve asset. The rising prices of these emerging alternatives are not coincidental but serve as a warning signal—trust in the US dollar is eroding. Coupled with geopolitical instability, investor demand for safe assets has surged, further pushing up gold prices.

Basel Accords Redefine Gold’s Status

Historically, gold was considered a “second-tier asset” within the financial system, classified as Tier 3 capital with lower liquidity ratings. However, with revisions to Basel regulations, gold has become a “first-tier capital” alongside cash and government bonds. This reclassification has significantly encouraged central banks and commercial banks worldwide to increase their gold holdings. After all, compared to the continuously printed paper money, gold’s scarcity and extraction difficulty will only increase.

Is Gold Still Worth Holding at This Stage?

In the context of the Federal Reserve’s continued rate cuts and a weakening dollar, gold’s status as a “first-tier asset” has been firmly established. As long as these fundamental factors remain unchanged, the long-term value of holding gold persists.

However, this does not mean gold will rise indefinitely. In fact, gold now faces unprecedented competition. The bond market has become more attractive due to rate cuts, and Bitcoin is attracting capital with even more astonishing gains. In this triangular competition, the future upward momentum of gold is expected to slow, and price volatility may increase.

Gold vs. Bitcoin: Completely Different Styles

Over the past year, Bitcoin’s gains far outpaced gold, with more volatility. For conservative investors seeking stable returns, gold remains a relatively moderate choice. Gold prices tend to be stable, while Bitcoin can be like a roller coaster—suitable for different risk preferences.

Gold and US Treasuries: A Tug of War

Recent data shows gold continuing to rise, while US Treasuries are at relatively low levels. This suggests that Treasuries are becoming more attractive now because they are cheaper. Conversely, gold prices are already at relatively high levels, with limited upside in the short term.

When Is the Right Time to Buy Gold? Technical Signals

Blindly following the gold rally can lead to buying at high prices and getting trapped. The smarter approach is to wait for a pullback and act only when technical signals indicate a good entry point.

Using Bollinger Bands to Find the Best Entry

From a technical perspective, gold is still fluctuating within an upward channel. The Bollinger Bands indicator shows that when gold approaches the lower band, it presents a relatively safe buying opportunity. This position indicates an undervalued zone within the established channel, effectively reducing entry risk. Investors can follow the Bollinger Band trajectory to avoid chasing prices at peaks.

Pullbacks Are Opportunities

Gold prices are not always smooth. Every correction provides an opportunity for investors to enter at lower costs. Patience in waiting for a dip and then entering when technical signals confirm a buy is a lower-risk strategy.

How to Participate in Gold Investment at the Lowest Cost?

There are various gold investment tools available, with differing costs and entry barriers.

Physical Gold: Low Liquidity, High Costs

Gold bars and jewelry are good for preservation but involve large bid-ask spreads, poor liquidity, and storage costs. For individual investors, the cost-effectiveness is low, and such assets are more suitable for central banks.

Futures and Options: High Barriers

Gold futures have good liquidity and acceptable spreads, but require high margin deposits, making capital utilization inefficient. Gold options have nonlinear payoffs, making them difficult for ordinary investors to grasp and profit from. Both are less suitable for non-professional investors.

Gold CFDs: Flexible and Cost-Effective

CFD (Contract for Difference) is a derivative that tracks the spot gold price, allowing investors to leverage their positions based on price movements. Its main advantages are simple trading processes, no need for frequent rollovers like futures, and much simpler than options—making it the most convenient choice for individual investors.

Is Gold Investment Suitable for Everyone?

Gold is a currency, a commodity, and a major asset class, so all types of investors can participate.

Central banks hold gold for inflation hedging and strategic reserves, which has proven its value historically. Hedge funds regard gold as a core asset with low correlation to other assets, helping to smooth portfolio volatility. Individual investors can also diversify their assets through moderate gold holdings, gaining hedging and inflation protection.

In short, whether institutional or retail, gold should have a place in asset allocation. Their purposes and holding periods differ, but the key is to choose the most suitable investment tools and timing.

Conclusion

The new all-time high of gold reflects the shaken confidence in the US dollar within the global financial system. Fundamentally, the medium- to long-term upward trend remains intact; technically, a pullback to the lower Bollinger Band is a good entry point. When is the right time to buy gold? The answer is clear—wait for a correction, confirm with technical analysis, and avoid chasing highs. Regarding investment tools, gold CFDs are the best option for individual investors due to their low cost and high flexibility. Unless the US government mandates a certain proportion of US Treasuries for central banks worldwide, the importance of gold as a strategic asset will only continue to rise under the current economic landscape.