The Core Logic of Gold Allocation: Geopolitics Is the Primary Driver
The pricing of gold has long been driven by two major factors: geopolitics and the economy. The recent “Operation Spider Web” in Russia and Ukraine, as well as the earlier India-Pakistan conflict, are vivid examples of gold’s safe-haven attributes.
We have repeatedly emphasized that in the current “Warring States Period” of global geopolitical fragmentation, one must never hold a zero position in gold. While most people do not yet fully grasp the significance of this statement, after experiencing several instances of sharp gold price volatility triggered by sudden geopolitical events, they will develop a reflexive understanding of its importance. Do not attempt to time the market precisely; you cannot predict what geopolitical events will occur between morning and afternoon, nor can you make a 100% accurate judgment on economic trends. The correct strategy is to maintain a core position: add to your holdings in stages during downturns and gradually reduce them during uptrends. This approach avoids both fully betting on the market and completely exiting it, thereby preventing you from being caught off guard by sudden risk events.
The current frequency and intensity of global geopolitical conflicts far exceed those of the past three decades of globalization’s “golden age.” Uncertainty is the new normal, and maintaining a core position in gold is an essential choice for hedging against risk.
The Current State and Future Trajectory of the Russia-Ukraine Conflict
The Core Conflict: The Sovereignty of the Four Eastern Ukrainian Provinces Is an Irreconcilable Deadlock
Currently, both Russia and Ukraine continue to launch attacks against each other, essentially to gain leverage for future negotiations. However, the likelihood of comprehensive peace talks is extremely low, primarily because there is absolutely no room for compromise regarding the sovereignty of the four eastern Ukrainian provinces.
Russia has paid a heavy price to secure the four eastern Ukrainian provinces, enduring multiple rounds of international sanctions, suffering significant losses in military equipment and personnel, and incurring a high public relations cost. It is impossible for Russia to relinquish this core interest in negotiations. Ukraine, meanwhile, continues to receive sustained support from Europe and cannot easily abandon its sovereignty claims over the four eastern provinces; the core demands of both sides are completely at odds.
Two Future Scenarios: A Temporary Ceasefire Is Highly Likely, While a Full-Scale Escalation Is Extremely Unlikely
Although a comprehensive peace remains a distant prospect, the likelihood of both sides reaching a temporary ceasefire is high. After years of war, the economies of both Russia and Ukraine are struggling to sustain prolonged conflict; both need a ceasefire to catch their breath and rebuild their economic strength.
The likelihood of a full-scale escalation of the conflict is also very low. If Russia possessed the capability to significantly escalate the war, it would have launched a full-scale offensive on Odessa long ago, rather than remaining deadlocked in the four eastern provinces to this day. Russia’s focus on capturing these four provinces is driven by clear strategic considerations: the primary objective is to safeguard the strategic security of Crimea; secondly, the high proportion of Russian-speaking residents in the region means that occupation would entail low governance costs and high social stability.
From a long-term strategic perspective, Russia’s ultimate goal is to control all Ukrainian territory along the Black Sea coast, with the core objective being to limit Turkey’s influence in the Black Sea. Should war break out, Turkey could at any time relax its restrictions on Black Sea passage for Western nations, allowing Western military forces to enter the Black Sea. By controlling the entire Black Sea coastline, Russia could deploy military forces in the region, thereby avoiding having its strategic lifeline choked off by Turkey. However, judging by current military developments, Russia clearly does not yet possess the capabilities to achieve this long-term objective.