Transcription
Friends, yesterday, the global financial world experienced a major event that could be inscribed in history books of economic learning. This news may affect your way of thinking and trading perspectives for months or even years to come. It will fundamentally change your understanding of the asset known as gold. Therefore, please do not rush to scroll past. I ask everyone to be patient and watch this clip to the end.
The European Central Bank, or ECB, recently released a report on Tuesday. In that report, there was a set of figures that caused Wall Street to be stunned and fall silent. That is, by the end of 2025, the proportion of gold in the international reserves of central banks worldwide will have surged to 27%. And what about US Treasury bonds? They have now been pushed down to only 22%. This is the first time in history that gold has surpassed US Treasury bonds and officially ascended to become the most important reserve asset on this planet.
You might be asking yourself, "Mr. Goh, how does this relate to my wallet?" I tell you, it is enormously related. Once you understand the logic and reasoning behind this major news, you will immediately realize that the current sideways price movement of gold is not just a simple consolidation. It is the final accumulation of energy before a big storm arrives.
In today's clip, we will delve into and dissect three main questions. First, what weapon did gold use to dethrone US bonds? Second, in the past, was there a correlation between the proportion of gold holdings and the price of gold? And third, during this historic period, what signals are technical charts showing us, and how should we plan to deal with it?
Alright, let's start dissecting the first point. Before I explain why this news is more important than negotiations between the US and Iran, or even more important than private sector employment figures, I must take everyone back to a seesaw that has been in play for over half a century. That is the seesaw relationship between gold and US bonds in the reserves of central banks worldwide.
To understand this seesaw game, we must first lay the foundation for understanding the term "international reserves." Every country in the world holds a large amount of money to use for international trade, to pay foreign debts, and to support its currency. This money is what we call international reserves. However, this money cannot just sit idly in a vault gathering dust. It must have a logic for investment allocation. We must consider where to place the large sums and where to place the smaller sums. Which assets can yield returns, and which assets serve only as insurance for peace of mind?
To make this game easier to visualize and understand, I will use an analogy. Managing a country's money by a central bank might sound like managing a typical family's finances at first glance. It's like dividing money into many baskets. But in reality, the way central banks have played this game for a long time is completely different from what ordinary people might think.
Consider how a typical family manages its money. Some is put into fixed deposits at banks because it earns interest, right? Another portion might be used to buy gold jewelry to keep, because it's beautiful and can be passed down to children. But keeping gold at home doesn't generate interest. For the past several decades, the thinking of central banks worldwide has been similar. They invested the largest sums in US Treasury bonds because they provide regular interest payments and are guaranteed by the world's most influential government. Smaller sums were used to buy gold bars for storage, as gold does not yield interest and requires a secure vault for safekeeping. Therefore, gold served only as a risk hedge. Consequently, US Treasury bonds were undoubtedly the number one protagonist in reserve portfolios, while gold was merely a supporting actor.
To summarize in short, gold was like a rented safe deposit box at a bank. You know it's there, but in your daily life, you rarely go to open it. But yesterday, the European Central Bank's report shouted to all of us that this script has been completely rewritten. The figure of 27% compared to 22% – how did this 5% gap widen? The answer to this lies in a global trend that many investors may not yet see through. That trend is that central banks worldwide are voting with their feet. They are gradually selling off the US Treasury bonds they hold and turning them into gold bars, piece by piece.
How aggressive is this trend? I have gathered some data for everyone to see. From 2022 to 2024, for three consecutive years, central banks worldwide have been net buyers of gold, exceeding 1,000 tons per year. Although in 2025, the buying pressure may have slowed down somewhat, they still purchased around 850 tons. China's central bank has been continuously accumulating gold in its vaults for 18 consecutive months. They have been quietly and steadfastly accumulating actual gold bars into the country every month, without wavering.
Furthermore, the governor of Poland's central bank announced publicly earlier that they intend to increase their gold holdings from 595 tons to 700 tons. In addition, Turkey, India, and Brazil have all joined the rush to buy gold. These countries are located in different corners of the world, have completely different governance systems, and face different economic challenges. Yet, they have all decided to do the exact same thing: exchange the paper assets in their hands for tangible gold bars.
Why is that? It is because a significant event has occurred that has shaken the global financial order. Back in 2022, the United States ordered the seizure of Russia's dollar reserve assets, valued at a staggering over $300 billion. That seizure was like a splash of ice-cold water, jolting every country in the world awake to the reality. They suddenly realized that the money they had deposited in someone else's pocket could be snatched or confiscated at any time. It's like you are a tenant who has deposited your life's savings in the landlord's safe, and then one day, the landlord walks up and says, "I'm confiscating all your money because we're no longer on good terms." Honestly, if it were you, wouldn't you panic?
The reaction of central banks worldwide was no different. They rushed to withdraw their money from others' hands as quickly as possible and convert it into assets that no one could seize. What asset can no one seize? The only answer is gold. Because gold is an asset that shines on its own, it does not require credit or guarantees from any government. And you no longer have to worry about sanctions or asset freezes. From that moment on, the trend of reducing reliance on the US dollar was no longer just a beautiful rhetoric; it became a serious undertaking, and gold became the biggest winner in this global asset reallocation.
Christine Lagarde, President of the European Central Bank, wrote a straightforward and blunt statement in that report. She said that prolonged geopolitical tensions are a strong driver of increased demand for gold from central banks. To translate this into simple layman's terms, it means the whole world is preparing for the worst-case scenario.
The key point here is that this does not just affect gold prices in the short term based on market sentiment. It is a structural positive factor that forms a crucial foundation and is beneficial in the long term, over a 10-year horizon. Before I explain this long-term impact, I must take everyone back in time for a moment.
Let's go back to the 1970s. The Bretton Woods system collapsed, officially severing the US dollar from gold. At this point, allow me to briefly explain what the Bretton Woods system was. To put it simply, it was the set of global financial rules created after the end of World War II. This rule stipulated that the US dollar would be pegged to gold at a fixed exchange rate of $35 per ounce of gold. Subsequently, other countries' currencies were pegged to the US dollar. At that time, people worldwide trusted and believed that the US government would uphold its promise, and everyone could exchange dollars for gold at any time.
But then, in 1971, President Richard Nixon made a sudden announcement that all previous promises were null and void. The dollar and gold were separated from that moment on. Think about it: before that event, what proportion of gold did various central banks hold? The answer is as high as over 60%. And after they separated, what happened? Every country began to sell off gold and instead hoard dollars, causing the proportion of gold holdings to plummet continuously until the late 1990s, when the proportion of gold fell to less than 10%.
And what did the price of gold look like during those decades? It fell from its peak of $850 in 1980 and dropped to around $250 in the late 1990s. That was a continuous decline for a full 20 years. The proportion of gold holdings decreased from 60% to 10%, and the price of gold fell from $850 to $250. Do you see the picture? These two things moved in almost 100% correlation.
Now, in the present era, this trend is being completely reversed. The proportion of global gold reserves has recovered from below 10% to 27% today. In contrast, the proportion of dollar reserves, which once exceeded 60% in its golden age, has now fallen to only about 40%.
Hearing this, you might start to wonder and have questions pop into your head: "Wait, didn't you just say a moment ago that the proportion of US Treasury bonds is 22%, so why is it 40% here?" Actually, this is very easy to explain. Treasury bonds are Treasury bonds, and dollar reserves are dollar reserves. These are two different things. Dollar reserves are like a giant basket containing many things. US Treasury bonds are just the largest component in that basket. Gold surpassing it this time is surpassing US Treasury bonds, not the entire dollar reserve basket.
This is what clearly emphasizes the core of the problem. The proportion of dollar reserves falling from over 60% to 40% means that the market share lost over the past 10 years has largely flowed into the gold market. Furthermore, analysis from Deutsche Bank clearly points out that if the proportion of gold continues to rise, even just to 40%, the price of gold commensurate with this proportion will become a five-digit figure, meaning it will start at least at $10,000.
Ray Dalio, a global investment guru, has explained this very thoroughly and incisively. He said that the most serious misconception most people have is viewing gold as just a piece of metal and believing that the currency printed by governments is real money. But in reality, it's the opposite. The essence of currency printed by governments is simply debt. Gold, on the other hand, is the true medium of account and exchange.
Since central banks worldwide are now collectively voting with their feet and rebalancing their gold holdings from being just an alternative asset to a primary reserve, you should no longer be looking at it with a short-term investor's eye, just hoping whether the price will go up or down tomorrow. Of course, I must also clarify that the European Central Bank's report also emphasized one point: that the reason gold's proportion has surged past US Treasury bonds is partly because the price of gold in the market is rising. As the price per ounce increases, the total market value of gold also expands, and consequently, its proportion is pushed up.
If we were to calculate backward, assuming the gold price remained at its 2023 level, US Treasury bonds would still have the advantage over gold. But that point is not significant at all. Because the most important point is this: central banks worldwide continue to buy, buy again, and even increase their purchase budgets. This kind of investment behavior, where they buy and don't sell, and even buy more when prices dip, is the true driving force pushing the proportion of gold in reserves upward relentlessly. And as long as this behavior continues, the base price of gold will be lifted higher and higher indefinitely.
But be careful, the Japanese government still has another secret weapon: selling dollars and buying yen. This method is not about selling US Treasury bonds. It is about taking the dollar reserves they hold and dumping them directly into the foreign exchange market. And do you know where these dumped dollars go? They flow into the hands of Japanese investors. And what do you think Japanese people who have just acquired dollars will do with them? Depositing them in banks yields almost no interest. Buying US Treasury bonds risks losses from exchange rates. They are reluctant to rush into buying US stocks, fearing the market is too high and they will be sold off. Finally, they discover the truth: buying gold to keep is the safest and most worthwhile option.
And this is the reason why every time the Japanese government intervenes in the currency market, the price of gold surges. It's not because US Treasury yields have stopped rising, but because the massive liquidity or money that the Japanese government releases into the market partly flows into the gold trading desks. This amount of money is large enough to offset negative news about rising bond yields.
See? This is the conflict that is at the heart of today's clip. The collective buying of gold by central banks worldwide is good news that supports prices in the long term. The Japanese government selling bonds, causing yields to rise, is bad news that pressures prices in the short term. These two forces, one pulling left and the other pulling right, are locked in a fierce battle, and gold will fluctuate in the middle of this battlefield.
Therefore, when you look at the chart and see gold prices oscillating around $4,500, please do not jump to conclusions. You must look closely to see which force, the left or the right, is currently in control of the game. And the main topic we are discussing today, gold becoming the champion over US bonds and ascending to become the world's number one reserve asset, is a confirmation that whispers to you that the long-term driving force from the left is increasingly expanding its influence and is becoming an unstoppable trend.
Alright, after hearing about these macro-economic stories, we now need to zoom in the camera lens to look at the most practical current chart. Let's put aside distant dreams for now and look clearly at what gold is doing during this period. If you open a 4-hour timeframe chart, you will see a beautiful and classic structure: an inverse head and shoulders bottom pattern, which appears to be quietly forming and accumulating energy.
To help everyone understand and feel the hidden power within this chart pattern, I will take about 1 minute to refresh your memory on what an inverse head and shoulders pattern is. For seasoned investors, it's a review of existing knowledge. For new friends, please listen carefully. This inverse head and shoulders pattern is like a high jumper preparing to leap over a bar. They need to crouch down as deeply as possible first. The lowest point, which touched $4,367 on May 29th, is like the moment they crouch down with all their might. The left and right shoulders are the periods when they tense their muscles to maintain balance and shift weight in preparation. And most importantly, the key resistance line, called the neckline, which is at approximately $4,590, is the bar that determines whether they will successfully jump over it this time.
The deeper they crouch, the more immense the compressed energy will be. As long as they can push off with both legs and soar over the bar, this jump will be considered perfect. But conversely, if they crouch down and their legs tremble, lack strength, or hesitate to surge forward when facing the bar, and ultimately retreat, the jump will be deemed a failure, and they will have to start crouching again to accumulate energy.
In the past few days, gold prices have been volatile and restless. Yesterday, during the European market opening, prices briefly broke through the $4,540 level. But shortly after, prices were pushed back, giving up almost all gains and falling back below $4,500. This morning, during the Asian market session, gold prices continued to trade in a narrow range below $4,500. But this point is very important. I want everyone to pay close attention to this small but powerful detail. No matter how violently the chart swings up and down, as of this morning's Asian market session, prices have never broken through the key support level of the right shoulder at $4,450.
This $4,450 support level is becoming the main battlefield where bulls and bears are engaged in a fierce fight. Imagine a tug-of-war competition. In the middle, there is a red rope tied, and both teams are using all their strength to pull the rope with all their might, neither giving an inch. The fact that prices have been repeatedly tested in this area indicates that both buyers and sellers are testing each other's patience and breaking points to see who will be the first to give up and collapse.
The key point is that if prices can hold their ground in this area and are supported by massive trading volume to break through the neckline at $4,590, then the inverse head and shoulders pattern will be officially declared complete. If we use the equal-distance measurement principle to calculate from the base of $4,367 to the neckline of $4,590, the distance is approximately $223. Once it breaks out, the minimum theoretical profit target is to add this height range from the $4,590 level, pointing the target destination directly to the $4,813 area. And when that day comes, gold will have a solid and strong springboard to confidently challenge the major round number target of $5,000.
But conversely, if this $4,450 support level is breached and broken, the structure of the right shoulder will be destroyed, and the inverse head and shoulders pattern will be invalidated and declared a failure. Gold prices may have to fall back, consolidate, and accumulate energy in the lower zone for a considerable period. Therefore, everyone must remember: the price zone between $4,450 and $4,590 is the most critical observation area and the most decisive for the coming week. It could be like a fuse that ignites a major explosion across the entire board. If it breaks through, it will be a perfect jump after a deep retracement. But if it falls through, it means it still needs to go back and consolidate and accumulate energy. Every movement up and down within this price range could be a signal from large investors testing the waters and gradually accumulating positions. So, you must open your eyes wide and watch it closely.
Finally, when we piece together all the clues from today, you will see a very interesting picture. Macro-economic fundamentals are shouting one truth to us: gold has ascended to the throne of global reserve assets. Buying pressure from central banks worldwide continues to pour in relentlessly. The long-term logic and reasoning have never been clearer than at this moment.
Meanwhile, technical factors are whispering another truth to us: the inverse head and shoulders pattern on the 4-hour timeframe chart is forming. The price zone between $4,450 and $4,590 is the decisive area, and the price chart is awaiting official confirmation of direction. Clues from both sides surprisingly point to the same crossroads. The true and great golden age of gold is not about tomorrow, nor is it about next month. It is a historical event happening right before our eyes this very second. This is Goh. I wish everyone the strength to stand firm and preserve their wealth amidst the turbulent waves of capitalism to welcome the golden age that belongs to you. See you in the next clip. Bye-bye.