Is there an opportunity for gold in the fourth quarter?

There is a famous saying in *Zhuangzi·Discourse on the Equality of All Things*, "That is one set of standards for right and wrong, and this is another set of standards for right and wrong."

It means there are respective criteria for judging right and wrong on each side. Arguing over the correctness of matters is essentially meaningless, because different stances and different contexts will lead to completely opposite judgments on the same thing.

A simple extension of this logic is that stance determines mindset, position holding determines point of view, and adults can never be persuaded by others.

When it comes to judging gold, the direction of its rise or fall may not be the core priority, and the key lies in one's stance. The so-called political economics puts politics before economics. The premise of economic judgment is stance. Therefore, the Nobel Prize in Economics is a typical embodiment of ideological stance.

The trend of gold is built on the basis of two stance judgments. For gold priced in US dollars, the first question is: What is gold? The second question is: What is your view on the US dollar?

What is gold?

Gold was the dominant currency before the era of credit currency, and it is now a marginalized currency. But once credit currency falls into crisis, gold will return to the center of the stage again.

For the first question, relatively few people regard gold as a pure mineral product and analyze it only through the supply-demand relationship. The vast majority of people believe that gold has monetary attributes, or at least considerable monetary attributes, and there is little dispute in this regard.

For the second question, the future purchasing power and status of the US dollar will determine the ultimate trend of gold prices.

People can still discuss the logic of the first question, while the second one is a test of everyone's respective beliefs.

On this issue, you cannot persuade the other party, everyone can only participate in the market with real capital, and let their own chips speak for themselves.

One side believes that the US dollar will remain a strong currency in the past, present and for a long time in the future.

The other side believes that no empire can last for 300 years. The United States is already on the wane, its fiscal discipline has completely failed, and the intrinsic value of the US dollar is about to enter a spiral decline phase, so the most sensible choice is to jump off the ship as soon as possible.

As you can see, there is absolutely no room for reconciliation between these two stances.

Following the view of a strong US dollar, we will see the dollar tide: the Federal Reserve raises interest rates, the US dollar index strengthens, and gold priced in US dollars will fall. Since March this year, gold has moved in line with the logic of the strong dollar camp: the 10-year Treasury yield has soared, the US dollar index has strengthened, and gold has accordingly corrected, falling from above $5000 per ounce to the current range of $4000 to $4500.

If the Federal Reserve starts to cut interest rates, will gold continue to rise? No, the strong dollar camp has another set of logic: the US dollar starting to cut interest rates means that the US dollar has taken control of the situation, and gold will enter a long-term sideways adjustment period. The once $5000 per ounce price may be a peak of gold prices in the next 10 years.

Following the line of thinking of the weak dollar camp, it can explain the doubling of gold's price since 2024. Gold broke through the long-term high of $2500 per ounce and rushed to above $4000 recently.

According to the view of this camp, if the Federal Reserve starts to cut interest rates, it means that the factors that suppressed the rise of gold in the short term have been eliminated, the actual value of the US dollar will shrink rapidly, and gold will skyrocket.

The problem is that in general discussions, people tacitly avoid touching on stances, and only waste time in technical analysis, supply and demand research, and the spiral of US interest rate hikes and cuts. The arguments will not only yield no results, but also further reinforce everyone's own judgments.

What is relatively more reference-worthy is the marginal change in the number of the two groups.

Central banks of all countries are staunch members of the weak dollar camp, because the intrinsic value of the US dollars they hold is bound to shrink in the long run. Therefore, not only China, but central banks of all countries are now selling their US Treasury bonds one after another and converting them into gold to bring back to their home countries. China's gold reserves have risen from about 1000 tons in 2012 to nearly 2400 tons now, and the number is still increasing every month.

The strong dollar camp is quite interesting, and its members mainly come from surplus economies. In their trade with the United States, traditional surplus countries have accumulated too many US dollars, which have become too big to dispose of. If the US dollar loses its status as the global reserve currency, they will suffer greater losses. This is exactly what we call "stance determines mindset".

Apart from these two camps, there is the silent majority, whose stance, or rather, beautiful wish, is that the US dollar leads the whole world to release liquidity to resolve debts. Because Europe, Japan and some developing countries have accumulated a large amount of government debt in the past two or three decades, the consequence is that Treasury bond yields soar, and public finance cannot make ends meet.

As for the Federal Reserve, the center of the storm, as the issuer of the US dollar, its original intention is naturally to maintain the strong status of the US dollar product for a long time.

There is another interesting group, that is the crypto circle. The wish of the crypto circle is that the US dollar should not be too strong, but not too weak either. According to the current fiscal discipline of the United States and the expansion speed of national debt, the traditional demand for US Treasury bonds will sooner or later disappear in a cliff-like manner. The accelerated issuance of stablecoins backed by US Treasury bonds as underlying assets will inevitably become the core driving force to solve the US Treasury bond problem in the next step.

The Federal Reserve and Wall Street have almost spared no effort to maintain the intrinsic value of the US dollar product. Companies like Amazon and Google are willing to turn their free cash flow negative to pour money into AI, which has created a roaring AI bull market. In order to prevent capital outflow, the yields of 10-year and 30-year US Treasury bonds have both hit new highs in nearly 20 years. Starting from December, Nasdaq even plans to launch a 24/5 all-weather trading mode that operates 23 hours a day.

We often say that a speck of dust in the great era, when it falls on an individual, is as heavy as a mountain. In the face of the great era, even an entity as powerful as the Federal Reserve has no qualification to cry out in pain when it is crushed by the tide of the times.

Place your bet and accept the result, win or lose.

This article is written based on public materials, for information exchange only, and does not constitute any investment advice

This article is from the WeChat official account "Jinduan" (ID: jinduan006), written by Yu Laotou, and published with authorization from 36Kr.