Wall Street’s short squeeze on gold has completely failed this time; there isn’t enough time or room left to push prices lower. If the U.S. actually implements YCC in the future, these institutions might just flip their positions and go long.

This failed short squeeze isn’t a tactical issue at all; it’s because the fundamentals of the U.S. dollar and U.S. Treasuries are absolutely rotten. Coupled with the broader trend of deglobalization, the world is dumping dollar assets and buying gold—demand simply can’t be suppressed. It is highly likely that gold will reach $3,700 in the coming months. Even if a liquidity crisis were to occur in the interim, it would only be a temporary pullback; the long-term trend remains unchanged.

The “Go for Spread” indicator has already signaled this in advance

“Go for Spread” refers to the bid-ask spread in gold leasing. This indicator moves inversely to the price of gold:

  • A widening spread indicates tight market liquidity, making gold prices prone to decline
  • A rapid narrowing of the spread indicates ample liquidity, signaling that gold prices are set to rise

Since the beginning of this year, this purple line has been trending downward. On August 8, I mentioned in a post that Wall Street’s short-selling strategy had failed and that gold was poised to embark on a new upward trend—a prediction that has now fully materialized. Of course, this indicator is merely a reference; my assessment of market trends also considers data such as the U.S. Dollar Index and global capital flows—I never base decisions on a single indicator alone.

Short-term spikes in the US Dollar Index do not affect the long-term trend

The sharp rally in the US Dollar Index at the end of July was quite alarming. Essentially, it stemmed from investment agreements totaling $3.6 trillion signed between the US and countries in Europe, Japan, South Korea, and the Middle East. If these agreements were actually implemented, the US Dollar Index would be unshakable, and gold would certainly come under pressure. However, it now appears that the probability of these countries fulfilling their commitments is virtually zero. The long-term bearish trend of the US dollar is a foregone conclusion, and it simply cannot stop gold from rising.

End-of-Month Delivery Pressure Has Become a New Market Norm

I don’t know if you’ve noticed, but since the beginning of this year, gold has either surged or plummeted at the end of each month, with volatility far greater than before. This is the result of excessive delivery pressure in the futures market following the last physical run on gold, driven by short-term speculative trading.

However, this pattern operates at the micro level—much like quantum physics—where short-term fluctuations are virtually impossible to predict. Gold’s long-term upward trend, on the other hand, operates at the macro level—as certain as general relativity. Don’t let micro-level noise cloud your long-term judgment.

Inverted Gold Lease Rate Curve Indicates Severe Spot Shortages

The gold leasing rate curve is currently inverted, with the 2-month rate exceeding the 12-month rate—a situation that would never occur under normal circumstances. This indicates that there are too many buyers scrambling for physical gold in the market; people are willing to pay higher short-term interest rates to borrow gold, highlighting a severe imbalance between supply and demand.

Whenever this curve experiences a sharp spike, it is almost always a signal that gold is about to embark on a long-term uptrend—a pattern validated by past bull markets.

Silver’s Performance Is Even Stronger Than Gold’s

This year, silver has shown significantly greater resilience than gold. During gold’s correction in April, silver spot markets consistently saw net inflows, and open interest has now surpassed previous highs, indicating a very strong willingness among investors to go long. This is because silver possesses both financial and industrial attributes: on one hand, it benefits from safe-haven demand driven by the devaluation of fiat currencies; on the other hand, demand from industries such as new energy and photovoltaics is growing, resulting in a supply-demand dynamic that is even tighter than gold’s.

Four Core Logics Behind Gold’s Long-Term Uptrend

Gold’s sustained price rise is driven by four long-term structural factors that will remain unchanged in the coming years:

  1. The collapse of the U.S. dollar’s creditworthiness, with unlimited money printing eroding purchasing power
  2. The collapse of U.S. Treasury credit, as debt scales up and default risks rise
  3. The trend toward deglobalization, supply chain restructuring, and the declining status of the dollar-denominated settlement system
  4. Ongoing geopolitical conflicts, increasingly intense rivalry among major powers, and an abundance of destabilizing factors

The combination of these four factors means that the U.S. money printing is now completely ineffective at stimulating the real economy; it can only fuel asset bubbles. The vast majority of the newly printed money flows into gold as a safe-haven asset, creating a positive feedback loop where prices rise whenever money is printed. Essentially, the fiat currency system has fallen into a liquidity trap.

Gold Is a Store of Value, Not a Path to Instant Wealth

I have always maintained that gold’s core function is to hedge against inflation and prevent social decline—it is not a vehicle for short-term wealth accumulation. In this current “Warring States era” of deglobalization, holding some gold can hedge against the risk of fiat currency depreciation, ensuring that even in extreme scenarios, your assets won’t shrink too drastically.

Twenty years ago, 5 kilograms of gold could buy an apartment in a second- or third-tier city, and it still can today—its long-term purchasing power remains remarkably stable. Of course, the gold bull market won’t last forever. Once Globalization 2.0 is fully restructured and the U.S. dollar’s credit is reestablished, the logic behind its rise will change. But the current wave of deglobalization has only just begun, so we won’t need to worry about that for at least another decade.

Outlook on Gold

My year-end target price is $3,700–$3,900. Once that level is reached, a pullback is highly likely, with $3,500 serving as a key support level. If prices quickly recover and resume the uptrend after the pullback, the bull market will continue; however, if $3,500 is effectively breached and prices fail to recover, a medium-term correction may ensue. The greatest risk is a sudden liquidity crisis in the U.S., which could drag gold down with it.

Outlook on Silver

This year’s target price is $42. Once we reach this level, I’ll first reduce part of my position—after all, I’m leveraged on the long side, and this rally has been substantial enough. I’ll hold onto the remaining position and wait; ideally, the price will consolidate around $42 for a while before a second wave of gains. Of course, you should follow your own investment plan—don’t just copy my moves.

A Few Investment Principles

First, you must clearly understand your risk tolerance. How much to allocate to stocks, how much to gold—this ratio is something only you can determine; no one else can help you with that. Second, you need to distinguish whether you’re doing long-term investing or swing trading. For long-term investing, there’s no need to check these short-term data points every day; for swing trading, you can refer to technical indicators. Most importantly, don’t trade based on emotions—chasing rallies and panicking at dips will inevitably lead to losses.

Investing involves risks; proceed with caution. Never blindly copy others’ trades. Honestly, if you can build your own analytical framework and keep learning new things, achieving annual returns of over 10% isn’t difficult at all.