The price of gold has captured global attention in recent years, reaching record highs and experiencing heightened volatility. Amid shifting macroeconomic conditions and evolving investor sentiment, questions arise about gold’s role in modern portfolios. In a recent address at the SSE Chief Forum, Xu Zhiyan, Chief Index Investment Officer at Huatai Fund, shared his insights on the enduring investment value of gold, emphasizing structural drivers over short-term fluctuations.
Xu argues that despite market swings—particularly in the second quarter of 2025—gold’s fundamental support remains strong. Three key pillars underpin its long-term bullish outlook: sustained central bank demand, geopolitical uncertainty, and the gradual weakening of the U.S. dollar’s credibility.
Three Structural Drivers Behind Gold’s Long-Term Strength
Since 2019, gold has steadily gained traction as a strategic asset. From 2024 through mid-2025, COMEX gold surged nearly 60%, outperforming many traditional asset classes. According to Xu Zhiyan, this momentum is not speculative but rooted in deep macroeconomic trends.
1. Central Banks Continue Aggressive Gold Buying
One of the most significant developments in recent years has been the relentless pace of gold purchases by central banks worldwide. As a finite resource—with annual global mine supply hovering around 3,600 tons—gold's scarcity enhances its value when demand rises sharply. Central banks, recognizing this, have been accumulating gold reserves at an unprecedented rate.
“Existing reserves can only sustain about a decade of current mining output if fully depleted,” Xu noted, underscoring how marginal increases in institutional demand can exert meaningful upward pressure on prices. This trend shows no signs of slowing, suggesting continued institutional validation of gold as a store of value.
👉 Discover how global macro trends are reshaping investment strategies in 2025.
2. Geopolitical Uncertainty Fuels Safe-Haven Demand
From the ongoing conflict in Ukraine to tensions in the Middle East, geopolitical risks have intensified. These events have driven capital toward traditional safe-haven assets, with gold topping the list.
Investors and institutions alike are increasingly allocating to gold not for short-term gains but as insurance against tail risks—low-probability, high-impact events that could destabilize financial markets. Xu emphasized that such uncertainty is unlikely to dissipate soon, meaning gold’s role as a hedge will remain relevant for years to come.
3. Erosion of Dollar Confidence Boosts Gold Appeal
While the U.S. dollar still dominates global trade and foreign exchange reserves, its long-term credibility faces mounting challenges. Rising national debt levels, fiscal imbalances, and unpredictable trade policies have eroded confidence in the dollar-based monetary system.
As trust in fiat currencies wanes, investors turn to hard assets like gold. Xu highlighted that if the U.S. resorts to monetary easing or quantitative easing to stimulate growth—a plausible scenario given economic headwinds—gold would benefit from its reputation as a hedge against currency devaluation and inflation.
“Gold thrives when faith in paper money weakens. Its intrinsic value doesn’t depend on any single government’s policy,” Xu explained.
Why Short-Term Trading Misses the Point
Despite gold’s impressive rally, Xu warns against treating it as a vehicle for short-term speculation. The metal’s price is influenced by a complex mix of macroeconomic forces, market psychology, and technical trading—factors that make timing the market extremely difficult.
“Gold is not an asset to chase on momentum,” he cautioned. “Attempting to profit from short-term price swings often leads to buying high and selling low.”
Instead, Xu advocates for a disciplined, long-term asset allocation approach. He encourages investors to view gold not as a speculative bet but as a core component of portfolio diversification.
Gold vs. Stablecoins: Complementary, Not Competitive
With the rise of digital assets, some investors wonder whether stablecoins might replace gold as a store of value. Xu believes otherwise.
Unlike cryptocurrencies or algorithmic stablecoins, gold has tangible backing and centuries of historical acceptance. More importantly, it is held in large quantities by central banks—a testament to its reliability.
“Stablecoins may offer utility in digital transactions, but they lack the physical scarcity and sovereign endorsement that gold enjoys,” Xu said. Rather than competing, he sees potential for coexistence: digital innovation highlighting gold’s time-tested stability.
👉 See how digital asset trends are influencing traditional investment thinking today.
Building a Smarter Portfolio: Diversify with Gold
Xu stresses that investors should avoid putting all their capital into a single asset class—a principle he calls “not putting all eggs in one basket.” Integrating gold into a broader portfolio helps manage risk and smooth returns over time.
To support this strategy, Huatai Fund has developed an ETF-based asset allocation model that incorporates risk profiling, global asset distribution, volatility analysis, and investor preferences. This framework is updated regularly and published transparently as an index, offering investors insight into evolving portfolio construction principles.
Data from Huatai’s own products—such as the Huaan Gold Easy ETF—show that investors who adopt dollar-cost averaging (DCA) and long-term holding strategies tend to achieve better outcomes. These users exhibit longer holding periods and more stable behavior during market turbulence.
Avoiding Pitfalls: Choose the Right Gold Products
As interest in gold grows, so does the risk of falling for misleading investment schemes. Xu urged caution: “Paper gold products have been phased out under new regulations. Investors must know exactly what type of gold asset they’re investing in.”
He recommends sticking to regulated and transparent instruments such as:
- Physical gold
- Gold accumulation plans (e.g., bank-backed programs)
- Exchange-traded funds (ETFs) listed on major exchanges
“If an investment promises high returns with little risk and doesn’t clearly disclose its structure—be skeptical,” Xu warned.
Any product claiming to offer gold-like exposure without clear regulatory oversight or physical backing should raise red flags.
👉 Learn how to identify trustworthy investment vehicles in uncertain markets.
Frequently Asked Questions (FAQ)
Q: Is gold still a good hedge against inflation?
A: Yes. Historically, gold has preserved purchasing power during periods of rising prices. Its limited supply makes it resilient to inflationary pressures caused by excessive money printing.
Q: How much of my portfolio should be allocated to gold?
A: Financial advisors often recommend between 5% and 10%, depending on risk tolerance and economic outlook. Xu suggests adjusting based on personal circumstances and market conditions.
Q: Can digital gold products replace physical gold?
A: Digital platforms can provide convenient access, but true safety comes from ownership of physical bullion or shares in fully backed ETFs. Always verify custody and redemption rights.
Q: Will central banks keep buying gold?
A: Current trends suggest yes. Many emerging-market central banks are diversifying away from the U.S. dollar, and gold remains a preferred alternative reserve asset.
Q: What happens to gold if interest rates rise?
A: Higher rates can weigh on gold in the short term due to opportunity cost. However, if rate hikes are accompanied by economic stress or inflation, gold often performs well despite rising yields.
Q: Is now a good time to invest in gold?
A: Timing the market is risky. Instead of trying to pick the perfect entry point, consider consistent investing through dollar-cost averaging using gold ETFs or accumulation plans.
Final Thoughts
Gold’s enduring appeal lies in its unique combination of scarcity, liquidity, and independence from any single nation’s fiscal policy. As global uncertainties persist and monetary systems evolve, its role as a portfolio stabilizer becomes even more valuable.
Rather than chasing price movements, investors are better served by viewing gold as a long-term anchor—a tool for risk management and wealth preservation across market cycles.
By focusing on education, transparency, and disciplined strategy, financial professionals like Xu Zhiyan aim to help investors navigate complexity with confidence—and recognize that true value isn’t measured in days or months, but in decades.
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