During this interview, the two experts analyzed the main factors behind the surge in gold prices and shared their insights on future market trends. They provided a comprehensive interpretation of the current macroeconomic environment and geopolitical risks, offering valuable trading strategy advice for investors, including entry-level tips, effective risk management methods, and techniques for maintaining a rational investment mindset. Whether you are an experienced investor or a newcomer to the market, this interview will provide profound insights and practical guidance.
Below is a recap of the in-depth interview between Terry and Star:
Terry：Renowned YouTube Influencer
Star：Chief Strategy Analyst at DecodeEX
Terry: People are saying this trend of gold price increase is particularly strong this time. Star, with your experience, how is this different from previous instances?
Star: Historically, gold has experienced three significant growth phases. The first was in the 1970s, from 1970 to 1980. The second phase occurred from the early 2000s to around 2012, lasting about 10-12 years. Currently, we are in the third phase, which, although it seems recent, actually began in 2018.
To understand how this current surge differs from previous ones, we can compare the impacts each surge has had on financial markets and their underlying causes. For instance, the first surge led to the collapse of the Bretton Woods system. The second surge resulted from the burst of the U.S. internet bubble and the 9/11 attacks, causing the U.S. unemployment rate to reach 6%, forcing the Federal Reserve to lower interest rates, which led to a significant drop in the dollar index and a rise in gold prices.
From 2004, while the U.S. managed to control unemployment, the problem of inflation arose due to monetary easing, causing gold prices to continue rising. In 2008, the severe financial crisis, primarily triggered by the subprime mortgage crisis in the U.S., led to another round of significant monetary easing by the Fed, boosting gold prices once again. This surge lasted from the early 2000s to 2012.
Currently, we are in the third phase of gold's rise, starting in 2018. The market anticipated a new round of monetary easing by the U.S. The outbreak of the COVID-19 pandemic in 2020 forced the Federal Reserve to inject massive liquidity into the market. Since 2018, U.S. Treasury yields have been declining while gold prices have nearly doubled. The recent geopolitical tensions, such as the conflict between Palestine and Israel in the Gaza region, have further stimulated gold prices, leading to a surge in the past few months. Therefore, I believe the causes behind each surge have significant differences.
Terry: Gold prices typically fluctuate due to various factors you mentioned, such as inflation, interest rate policies, and geopolitical risks. What other factors, besides geopolitical risks, have influenced gold prices in the past three months?
Star: While many people intuitively believe that wars or political issues drive up gold prices, I think these are more trigger factors. More fundamental reasons support the current gold surge.
Firstly, inflation is a crucial factor. According to Marx's Capital, "money is inherently gold and silver, but gold and silver are not inherently money." This means that in times of inflation, gold becomes a preferred asset. When inflation rises, the investment value of fiat currency decreases, while gold, as a safe-haven asset, retains its value. The COVID-19 pandemic led to a global economic recession, and central banks worldwide adopted monetary easing policies, resulting in currency depreciation and inflation.
Secondly, we are currently anticipating future interest rate cuts by the Federal Reserve. Both the U.S. dollar and gold are considered reserve assets, and they have a substitution effect. Storing gold does not generate interest, whereas holding dollars or U.S. Treasury bonds does.
As the Federal Reserve adjusts its benchmark interest rate, the returns on dollar investments change, influencing the opportunity cost of investing in gold. When the Fed raises interest rates, the opportunity cost of holding gold increases, making gold investment less attractive. Conversely, when the Fed lowers interest rates, the opportunity cost decreases, driving up gold prices.
Investors often act based on expectations. Although the Fed has not yet implemented interest rate cuts, the current rise in gold prices already reflects the market's anticipation of future rate cuts.
Terry: So, you mean it’s priced in?
Star: Yes, many countries and market participants are already positioning for the Fed's future rate cuts.
Lastly, geopolitical risks significantly impact gold price fluctuations. For example, on the 16th of last month, when Israel announced a counterattack on Iran, gold, which was in a correction phase, saw a sharp increase. From the Russia-Ukraine war to the current Middle East conflicts, gold prices have been rising. Central banks worldwide are also increasing their gold reserves. For instance, China's central bank raised its reserves from 72.58 million ounces in February to 72.74 million in March, marking the 17th consecutive month of increases.
Many individuals and enterprises are also investing in gold, driving up demand and prices.
Terry: In a globally unstable economy, gold serves as a safe-haven asset. Many companies and countries are increasing their gold reserves. How should investors consider gold prices in their investment strategies to diversify risks?
Star: Various global asset categories are highly correlated. For example, securities investments are seen as risky, while gold investments are considered safe havens. However, recent years have shown that due to central banks' monetary easing, both the securities market and the gold market have reached new highs. In the future, with potential Fed rate cuts, we might continue to see asset prices rise.
However, the risk of economic bubbles bursting remains, which could have disastrous effects on the market.
From an investment perspective, it’s a long-term endeavor, not one expecting short-term returns. Investors need to carefully select quality assets within various categories to ensure stable returns during economic instability.
Terry: Many people consider cryptocurrencies, digital currencies, and crypto as new asset classes that might replace gold or even have more potential. Some view them as direct competitors to gold. How do you see this, and how might it change investment portfolios?
Star: A fascinating phenomenon recently observed is that when gold rises, Bitcoin often rises too. Both gold and digital currencies have some similarities, such as limited supply, and are increasingly seen as alternatives to fiat currencies. However, there are differences, such as gold being a consumable commodity.
In recent years, digital currencies have garnered more investor attention and public acceptance. The launch of many digital currency ETFs reflects their growing influence in financial markets. Although their rise might dilute gold's share to some extent, I believe digital currencies cannot fully replace gold's safe-haven attribute in the short term. We still consider them within the risk asset category.
From understanding investment markets or diversifying asset risks, every investor should pay attention to and understand the development of this new digital currency market. They should assess whether digital currencies fit into their investment portfolio based on their risk tolerance.
Terry: Given the current environment, what investment strategies would you recommend for the next 1-3 years or 3-5 years?
Star: Many of our audience members are ordinary investors or retail traders. The most important thing is to have a clear trading plan, knowing your entry point, maximum profit target, and stop-loss point, and strictly follow your plan to control risks and achieve stable returns.
This is challenging for many ordinary investors to systematically implement. Therefore, I suggest trying our Decode trading strategy, refined from over 20 years of investment experience and feedback from over 500,000 users.
This strategy considers technical indicators like resistance levels, support levels, trend direction, and integrates our 20 years of investment experience. Our real-time trading data shows an almost 80% success rate over the past 20 years. This strategy also covers gold investments with impressive success rates.
From May 20th, we launched a gratitude campaign for loyal users and welcomed new users with up to $10,000 in experiential funds on our DecodeEX platform. Following our strategy, you could achieve up to 7% returns in seven days. After completing the campaign tasks, users can withdraw the profits and even the experience bonus themselves.
Terry: For beginner investors, what tools or products would you recommend for analysis and investment?
Star: For beginners, growth follows a path. Initially, one should observe and learn from others' trading. In the second phase, practice trading in a simulated environment where prices and data mirror real markets.
After mastering simulated trading, beginners can start trading with small amounts in real markets to experience real gains and losses, gradually increasing their investments.
However, this learning path often requires time and effort. Thus, a new product for beginners has emerged: copy trading. This allows users to select reliable traders and replicate their orders. It’s like investing in a fund where you pay a small profit share to the trader while keeping most of the profits yourself.
On DecodeEX, we offer similar copy trading products with over 50 professional traders. Users can view each trader's real-time positions, historical trades, capital, historical returns, and number of copiers.
Finally, I want to emphasize that fund safety is crucial. DecodeEX leads the industry in this regard, being regulated by authorities such as the Australian Securities and Investments Commission (ASIC), Vanuatu Financial Services Commission (VFSC), and the U.S. Financial Crimes Enforcement Network. Every investment transaction is strictly regulated and protected, ensuring the safety of your funds.
We invite everyone to experience our DecodeEX platform.