Gold prices break through $4000. Is it a good time to buy jewelry and spot gold now?

Gold entered an upward cycle in October 2023, climbing for 13 months to reach $2,700, then accelerating past the $4,000 mark. According to Reuters’ survey of market analysts, the average price for 2025 is forecasted to be around $3,400, with potential to rise further to $4,275 in 2026. Facing this rally, investors’ most pressing questions are: Is it still a good time to enter now? Is it worth buying at such high prices? Should we add to positions immediately during dips?

This article will analyze the underlying logic behind gold’s new highs, forecast future trends, and reveal the most suitable entry points based on fundamental and technical analysis, helping you make smarter investment decisions.

Why Can Gold Reach Historic Highs? Three Core Drivers

Gold itself does not generate interest income; its price changes are entirely driven by supply and demand imbalances. The root cause of these imbalances lies in the shaken confidence of investors (including individuals, corporations, financial institutions, and central banks) in traditional assets.

Excess global liquidity and currency credit crises

Since 2020, the US has implemented unlimited quantitative easing to address domestic liquidity issues, but this has spilled inflationary pressures into the global economy. By 2022, the Federal Reserve rapidly raised interest rates to combat domestic inflation, leading to a significant devaluation of global debt. As the US dollar and US Treasuries’ creditworthiness eroded, investors began selling cash and bonds, turning to gold and other alternative assets for protection.

Rise of cryptocurrencies and the era of diversified stores of value

Bitcoin’s price has surpassed $100,000, and the Trump administration has designated it as a strategic reserve asset. This indicates a shift in the market landscape of traditional safe-haven assets—investors are no longer solely relying on gold but also turning to cryptocurrencies. The competition among various alternative assets highlights a crisis of trust in the US dollar. Coupled with geopolitical instability, the demand for safe assets has boosted gold purchases.

Basel Accords revision, gold regains favor among financial institutions

Previously, Basel regulations classified gold as Tier 3 capital with lower liquidity, limiting banks’ enthusiasm. The latest revision redefines gold as Tier 1 capital, on par with government bonds and cash, regarded as the highest quality asset.

This policy shift has profound implications for the financial system—banks are increasing their gold holdings significantly, as compared to the continuously printed fiat currency, gold’s scarcity and rising extraction costs enhance its value preservation potential far beyond monetary assets. Central banks’ gold reserves reaching record highs exemplify this transformation.

Fundamental Analysis: Is Buying Gold Now Still Cost-Effective?

The current environment remains favorable for gold. With the Federal Reserve entering a rate-cutting cycle and the US dollar weakening, trillions of dollars are flowing out of the currency markets into “Tier 1 assets” like gold and bonds. This trend is unlikely to reverse in the short term, implying that gold’s purchasing power will stay strong.

However, caution is needed: gold’s price growth will gradually slow, and volatility may increase. There are two reasons:

First, increased competition. Bitcoin and US Treasuries are also vying for capital inflows. US stocks, supported by economic data, remain attractive, making investor choices more complex.

Second, prices are already relatively high. Technical indicators show gold is at the upper end of an upward channel, with limited room for further gains, while downside correction risks are rising.

Gold vs Bitcoin vs US Treasuries, which is the best choice?

The performance over the past year shows: Bitcoin’s gains are the most aggressive (over 200%), with the highest volatility; gold has steadily risen with relatively moderate fluctuations; US Treasuries remain low but are beginning to show long-term appeal.

For conservative investors, gold remains the top choice—risk is controllable, and returns are steady. But for more aggressive investors willing to accept volatility, diversified asset allocation can maximize gains.

Technical Analysis: The Best Entry Points for Gold

Gold does not rise continuously; price fluctuations contain buying and selling opportunities. Technical analysis can help investors pinpoint precise entry and exit points.

Bollinger Bands: Finding the Ideal Buy Zone

From a technical perspective, gold is still operating within an upward channel. According to Bollinger Bands, gold often finds support near the lower band, which is a traditional buy signal zone.

Key principle: When gold prices pull back to the lower Bollinger Band, it is an ideal entry point for long-term investors. Buying at this level allows for lower-cost position building. When prices rebound toward the upper band, profit potential is significant.

Rationale for buying on pullbacks

Avoid blindly chasing highs. After reaching new highs, short-term pullbacks are normal and often the safest entry opportunities. Historical experience shows that during periods of rising risk aversion or increased central bank gold purchases, pullbacks tend not to be deep, making these periods golden windows for accumulation.

Cost Comparison of Gold Investment Methods: Which Is Most Suitable for You?

There are many tools for investing in gold; choosing the wrong one can significantly increase costs and risks.

Physical gold (bars, jewelry)

High bid-ask spreads, poor liquidity, high storage costs. For individual investors, physical gold is highly inefficient. Central banks buy large quantities because they benefit from secure storage systems—individuals cannot replicate this.

Gold futures and options

Good liquidity and narrow spreads, but high account opening thresholds and large margin requirements lead to inefficient capital use. Options’ nonlinear payoff structure makes losses easy for ordinary investors, with high risk management difficulty.

CFD contracts (most suitable for individual investors)

Gold CFDs are derivatives tracking spot gold. Compared to futures, they do not require frequent rollovers; unlike options, they lack complex exercise mechanisms. Trading is straightforward, flexible, and low-cost. Leverage allows small capital to control larger positions, suitable for retail investors with limited funds wanting participation.

For most individual investors, gold CFDs are the optimal choice. Low threshold, simple operation, transparent costs.

Investment Strategies for Different Types of Investors

Gold combines monetary, commodity, and asset attributes. Various investors can participate, but their purposes and strategies differ.

Central banks: Anti-inflation + strategic reserves. Gold is a hard asset that withstands historical tests. Regardless of financial system changes, gold’s value remains timeless.

Hedge funds: Asset allocation + risk hedging. Gold has low correlation with stocks and bonds, smoothing net asset value fluctuations and achieving risk management. Institutions typically allocate 5%-15% of their portfolios to gold.

Individual investors: Diversification + long-term appreciation. Moderate gold allocation can protect wealth from inflation and serve as a safe haven during systemic risks.

Conclusion: Whether institutional or individual, one should choose tools and allocation ratios based on risk tolerance and investment horizon. There is no absolute “best,” only the “most suitable.”

Final Judgment on Gold Investment

Gold remains a core asset for coping with economic uncertainties. Unless the US government uses political power to force central banks to hold specific proportions of US Treasuries (which is nearly impossible in the short term), the current economic landscape suggests the long-term upward trend of gold will continue.

Practical recommendations:

• Short-term: Be patient and wait for gold prices to pull back to the lower Bollinger Band for the lowest-cost entry.
• Medium-term: Combine global liquidity, geopolitical developments, and central bank policies to judge the overall cycle direction.
• Long-term: Incorporate gold into your asset allocation, with a 5%-10% exposure providing effective protection.

Gold’s value lies not in short-term gains but in long-term purchasing power preservation. When fiat currencies face credit crises, gold remains the ultimate trusted asset.