Historic moment! Gold price doubles in two years + central bank continues to buy gold Gold replaces US Treasuries as the world's largest reserve asset held by central banks

According to a report released by the European Central Bank on Tuesday, after central banks around the world have been increasing their gold reserves for several years and the price of gold has nearly doubled in the past two years, gold has replaced US Treasury bonds as the world's largest central bank reserve asset. The European Central Bank stated that by the end of 2025, gold accounted for 27% of the total global central bank reserve assets, up from 20% a year ago; while during the same period, the share of US Treasury bonds decreased from 25% to 22%. The report believes that the significant increase in the proportion of gold reserves is primarily due to valuation effects. Thanks to the sharp rise in the price of gold in 2024 and 2025, the value of gold assets has soared, thus gaining a greater share in global central bank reserves. Despite achieving this important milestone, the European Central Bank stated that it does not believe this trend is sustainable. The European Central Bank stated in the report, "Looking ahead, gold as an official reserve asset has limitations compared to major fiat currencies. Its price fluctuates significantly, does not generate income, and storage costs are high when held physically." "More importantly, gold supply is not completely elastic and cannot seamlessly adjust with changes in international liquidity demand." After a significant increase in the price of gold in the past two years, reaching a historical high of nearly $5,600 per ounce in January this year, gold did not continue to rise further under the drive of safe-haven sentiment with the outbreak of the conflict in the Middle East. Instead, it saw a significant fall from the high levels - as of the time of writing, spot gold was trading at $4,476 per ounce - mainly due to the energy impact of the Middle East conflict pushing inflation higher, plus the potential combination of the new Fed Chairman Vosh's policy of "balance sheet reduction first, rate cuts later," which has suppressed the gold priced in USD. In addition, profit-taking by investors after the previous rise in gold prices, as well as some countries selling gold reserves for cash have also exacerbated the selling pressure faced by gold. Wall Street's "debate" on the future of gold This year, the trend of gold has been as volatile as a roller coaster, and investors are closely watching its next move. As gold undergoes adjustments, several Wall Street banks have revised their price targets for gold. Morgan Stanley was the first to lower its gold price expectations at the end of April, cutting its target price for gold in the second half of 2026 to $5,200 per ounce, well below its previous forecast of $5,700 per ounce. The institution's reasoning was that geopolitical tensions caused real interest rates to rise, and the classic negative correlation between gold and real interest rates returned to normal. JPMorgan Chase revised its average price forecast for gold in 2026 from $5,708 per ounce to $5,243 per ounce, and mentioned in its report that total open interest and trading volume for COMEX gold futures continued to be weak, with managed fund futures net positions hovering at lows and ETF fund inflows remaining subdued. ANZ Bank reduced its year-end gold target price from $5,800 per ounce to $5,600 per ounce, and postponed the target date for gold to reach $6,000 per ounce from early 2027 to mid-2027. The bank's analysts pointed out, "The market seems to be in a dilemma, on one hand, there is anxiety caused by geopolitical tensions, on the other hand, there are concerns about rising inflation." Citi recently expressed a bearish view on the short-term outlook for gold, predicting that the price of gold will touch $4,300 per ounce within the next 3 months. The institution believes that once the US and Iran successfully finalize a cooperation agreement and maritime order is fully restored, international oil prices return to pre-conflict levels, market inflation sentiment will quickly weaken, real interest rates will rise accordingly, and this will then put pressure on the gold price. However, Citi has not turned completely pessimistic towards the medium-term outlook for gold, maintaining its target price of $5,000 per ounce for the next 6 to 12 months. Most institutions have not changed their stance on the future trend of gold. Goldman Sachs still maintains its bullish view on gold, and predicts that gold will regain its upward trend by the end of 2026. The bank's analysts Lina Thomas and Daan Struyven stated in their report that the medium-term outlook for gold remains solid, as central banks around the world continue to buy gold and the US is expected to have two more rate cuts this year, which could push the price of gold to $5,400 per ounce. UBS lowered its year-end gold price expectation from $5,900 per ounce to $5,500 per ounce last week, citing continued unfavorable factors brought about by high US Treasury bond yields and the continuous rise in the US dollar. Despite believing that the structural bull market for gold is not over, analysts Dominic Schnider and Wayne Gordon stated that investors may need to exercise more patience in the face of these challenges. However, their forecast also indicates that the price of gold can still rise by another $1,000 by the end of the year. UBS has always believed that gold is essentially a tool to hedge against the broader secondary impacts of conflicts, rather than to directly defend against frontline war threats. The core function of gold is to isolate and defend against currency depreciation, soaring fiscal deficits, and slowing economic growth resulting from geopolitical conflicts. UBS analysts also admitted, "In the short term, rising energy prices and inflation concerns have led to a rise in the US dollar and have caused worries about potential rate hikes - both of which are unfavorable for the price of gold. However, we expect central banks around the world to closely monitor inflation risks and refrain from premature rate hikes." Furthermore, the longer the US-Iran conflict is prolonged, the greater the negative impact it will have on the macro economy, which in turn will continue to support demand for gold as a hedge. UBS stated, "In the long run, gold is an effective tool against inflation. According to the 'Global Investment Returns Yearbook', the real return on gold and commodities has been positively correlated with inflation since 1900." UBS also emphasized that structural trends will continue to support the attractiveness of gold and stated, "We expect that high government debts, efforts by central banks and global investors to diversify investments, and reduce dependence on the US dollar, among other structural trends, will support the long-term prospects for gold. Therefore, considering the macroeconomic and political uncertainties beyond the risk posed by the US-Iran conflict, we still remain positive on gold and believe that this precious metal remains an effective tool for diversifying investment portfolios. Investors interested in gold may consider allocating up to a 'mid-single-digit percentage (around 5%)' of gold assets in a diversified asset portfolio." It can be seen that the logic of "short cold and hot" is the most prominent characteristic of this round of shifts by major Wall Street banks. For the medium-term outlook for gold, Credit Suisse even boldly predicts a price of $8,000, with the main bullish reasons focused on currency depreciation. Credit Suisse pointed out that the global economy has entered its fourth round of "currency depreciation cycle", with the continually rising debt, deficits, and inflation eroding the value of fiat currencies such as the US dollar. In such times, investors often seek refuge outside of traditional systems. Historically, gold has always been the best haven for wealth preservation. A strategist at Credit Suisse stated that four out of five economic scenarios point to further currency depreciation, and gold prices may rise to $8,000 per ounce by 2027 as a result. However, in a pessimistic scenario, if the momentum of currency depreciation is not as expected, the price of gold may fall to $4,000 per ounce by the end of 2027. Pierre Lassonde, a legendary figure in the Canadian mining industry, has even predicted that as gold replaces the US dollar as the ultimate reserve currency, the price of gold could reach $17,250 per ounce. Pierre Lassonde stated that the current extreme leverage has made the current economic cycle more volatile. In the late 1970s, as inflation and interest rates rose simultaneously, the price of gold increased tenfold, and now one must also consider the enormous sovereign debt of the United States. He believes that the Federal Reserve is monetizing debt, thereby providing sustained tailwinds for gold. He firmly believes in the gold price target of $17,250 per ounce, which is not an unrealistic dream, and the market will see it realized within three years.