I. Executive Summary
⦁U.S. May CPI came in below market expectations, fueling speculation of Fed rate cuts as early as September.
⦁The U.S. Dollar Index (DXY) declined by 0.23% to 98.87, while gold and crude oil prices surged—COMEX gold hit $3,361.6/oz, up 0.54%, and Brent crude climbed to $68.01/bbl, gaining 1.7%.
⦁The European Central Bank (ECB) released its annual International Role of the Euro report, revealing that gold has surpassed the euro as the world’s second-largest reserve asset, now representing 20% of global foreign exchange reserves.
⦁China’s central bank has increased its gold holdings for seven consecutive months, reaching 73.83 million ounces, with strategic intent.
⦁Gold is transitioning from a traditional “safe haven” to a core reserve asset as geopolitical and financial realignment reshapes the global monetary architecture.
II. Key Drivers of the Current Trend
1. Cooling Inflation Sparks Rate Cut Speculation
⦁May U.S. CPI rose by only 0.1% month-on-month, with core CPI also at 0.1%—both below consensus.
⦁Futures markets now price in a 78% probability of a Fed rate cut in September, with two cuts expected by year-end.
⦁Lower rate expectations undermine the dollar’s appeal and shift investor appetite toward non-yielding assets like gold.
2. De-dollarization Accelerates Gold Accumulation
⦁The ECB notes a rising global preference for non-credit-based assets like gold due to geopolitical tensions and sanctions risk.
⦁Gold now accounts for 20% of total global FX reserves, overtaking the euro’s 19%, solidifying its position as the second-largest reserve asset.
⦁Central bank gold purchases in 2024 have already surpassed 1,000 metric tons, double the average annual pace seen in the 2010s.
3. China’s Persistent Gold Accumulation Reinforces Long-Term Value
⦁The People’s Bank of China (PBoC) added gold for the seventh straight month, signaling a strategic commitment to reserve diversification.
⦁Despite recent pullbacks in gold prices, China continues to buy on dips, reflecting long-term resilience priorities.
⦁Gold accounts for only 7% of China’s official reserves—significantly below the global average (~15%), indicating room for further allocation growth.
III. Investment Strategy Recommendations
1. Asset Allocation Guidance
Asset Class Recommendation Rationale
Physical Gold / Futures Increase to upper strategic bound Strong structural drivers:
rate pivot, CB demand,
weaker USD
Gold ETFs (e.g., GLD, IAU) Accumulate on dips for LT exposure Liquid, transparent, ideal for
HNWIs & family offices
Gold Miners (e.g., Newmont, Barrick) Selective exposure with due diligence Correlated to gold, but higher
operational volatility
2. Allocation Logic
⦁Gold is no longer just a tactical hedge—it’s becoming a core strategic reserve.
⦁Unlike U.S. Treasuries or euro-denominated assets, gold is immune to counterparty risk, making it especially relevant in a multipolar financial world.
⦁The approaching rate cut cycle lowers real yields, making gold more competitive as a non-yielding asset.
IV. Risk Factors to Monitor
Risk Source Description Suggested Hedging Strategy
Delayed Fed Pivot / Potential Fed hawkish reversal may Hold partial DXY hedges (e.g.,
Inflation Rebound temporarily suppress gold USD call options)
Overextension / Gold has run up sharply— Apply pyramid entry strategies,
Technical Correction pullbacks possible manage position sizing
Geopolitical Flashpoints Escalating conflict may trigger Maintain diversified exposure
cross-asset volatility across real assets
V. Conclusion
Gold is reasserting itself at the center of global monetary reserves. Unlike its post-2008 safe-haven cycle, this rally is rooted in structural shifts in global central bank behavior, amid a steady move toward reserve diversification and geopolitical resilience.
We recommend high-net-worth investors, sovereign funds, and strategic allocators establish or increase strategic gold exposure ahead of full market repricing. The current window offers an asymmetric opportunity to benefit from gold’s strategic revaluation.