🟡Through Volatility 📊 Understand the Core Value of Gold

Although a 20% pullback and the market's rapid rise were once seen as precursors to speculative bubbles, the underlying market logic still supports gold's medium- to long-term prospects.

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🔸🔸🔸The following are the three major current conditions of the gold market🔸🔸

1/ Triggering Factors for Short-Term Adjustment

Kevin Warsh's nomination as Chairman of the Federal Reserve was undoubtedly the main trigger for this adjustment. His consistently strong hawkish stance has been interpreted by the market as a possible shift towards a tighter Fed policy direction, thereby dampening investors' expectations of further rate cuts. However, it is worth noting that the expectation for rate cuts has only been postponed rather than completely disappeared, leaving room for variability in the long-term monetary policy direction.

2/ Strong Fundamental Support

The long-term drivers of gold remain robust. Global central banks have continued to increase their allocation of gold in recent years, with an annual scale reaching 1,000 tons; coupled with rising geopolitical uncertainties, providing substantial demand support for gold. As a core tool for hedging against inflation and currency risks, the strategic nature of gold remains unshakable. Additionally, the disorderly expansion of U.S. government fiscal deficits and high global debt levels further reinforce gold's safe-haven value. In 2025, total gold demand exceeded 5,000 tons for the first time, reflecting the real market demand for gold.

3/ Structural opportunities

Trump's policies have become a catalyst for rising gold prices. Whether it’s trade wars, adjustments in military geopolitics, or signals of dollar depreciation, they all indirectly support gold prices. Current fund flows indicate that investors are shifting from U.S. bonds to gold to hedge against global macro risks, reflecting profound changes in asset allocation patterns.

Gold’s long-term safe-haven value remains unchanged

For investors, understanding the core value of gold in a portfolio lies not in capturing short-term fluctuations but in leveraging its role in diversifying risks and stabilizing volatility. Gold has a low correlation with stocks and credit assets, making it particularly prominent during periods of high inflation and geopolitical conflict.

We believe that investors can adopt a long-term, phased, and rule-based allocation strategy rather than frequent timing trades. For conservative portfolios, gold can act as a 'ballast' to hedge against inflation and systemic risks; for aggressive portfolios, weights can be moderately increased during periods of rising macro uncertainty to balance overall drawdowns.

Overall, gold resembles an 'insurance asset' within a portfolio. In an era of rising uncertainty, gold’s safe-haven properties and strategic allocation value remain prominent.

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Mr. Zhaoshande, Senior Strategist for ETF Business at Value Partners

Mr. Zhao is responsible for the strategic development and implementation of the Group’s Exchange Traded Fund (ETF) business, with a focus on the Group's ETF capital markets operations. He also drives the development and strategic positioning of the Group's ETF business. He has extensive expertise in ETF product development, capital markets, and fund operations.

(The opinions expressed in this article are solely those of Value Partners Investment Management Hong Kong Limited (“Value Partners”) and are subject to change based on market and other conditions. The information provided herein does not constitute any investment advice and should not be considered as a basis for making investment decisions. All data is collected from sources deemed reliable, but Value Partners does not guarantee the accuracy of the information. Some statements contained in this article may be considered forward-looking statements, which do not guarantee future performance, and actual results or developments may differ materially from those statements.)

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