Reviewing three rounds of gold price surge cycles: How is gold priced?
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Since the start of the third round of the gold bull cycle in 2019, this round's rally in gold has now lasted for six years, with a cumulative increase of 219%. Although there is still room for further growth compared to previous cycles, the current valuation level has drawn widespread market attention to gold's subsequent trend.
On October 20, 2025, COMEX gold and London spot gold closed at $4,374/oz and $4,294/oz respectively, with year-to-date increases of 66% and 63%. Although after October 21, gold prices consolidated in a sideways range following a sharp drop, as of November 10, prices had only retreated about 5% from the highs and remained within a historically high zone.
Recently, in its latest research report, East Money Securities reviewed the three cycles of gold price rallies, stating that gold's ongoing rise is mainly supported by its triple attributes. As a monetary asset, the U.S. dollar has depreciated by nearly 100% relative to gold, but a stabilization in the dollar index in October may weigh on gold prices; as a commodity, central bank gold buying demand grew at an average rate of 44% per year from 2020 to 2024; as a financial asset, the traditional negative correlation between real interest rates and gold has partially failed in a high-inflation environment.
Regarding whether gold prices can continue to rise from here, the firm believes that geopolitical risk, growth in gold reserves, and movement in real interest rates are the three key variables in this cycle, and these will determine whether gold prices can maintain their upward momentum.
Historical Cycle Review: The Third Rally Still Has Room to Run
The report states that since 1968, gold has experienced three rounds of bull markets.
The first rally lasted ten years, from 1970 to 1980, with a peak gain of 2,323%, mainly driven by the collapse of the Bretton Woods system, the reshaping of the dollar's credit system, the oil crisis, and the Cold War among major powers.
The second cycle ran from 2001 to 2012, lasting eleven years, peaking at a 599% gain. This cycle was mainly driven by the bursting of the Internet bubble, financial crisis, European debt crisis, and the rapid rise of emerging economies.
The current rally began in 2019 and has lasted six years with a cumulative gain of 219%.
Compared to the previous two cycles, the duration of this bull market is roughly half as long and the increase has been relatively moderate. From the perspective of both time and magnitude, this cycle still has space to continue compared to previous peaks.
Monetary Attribute: The Dollar’s Credibility System Faces Challenges
The report indicates that the gold price-to-M2 ratio is currently slightly above its long-term average, reflecting that gold may be reasonably valued but has not hit historical highs.
Since 1970, the U.S. dollar has lost nearly 100% of its value relative to gold. In 2025 alone, the depreciation is about 35%. Persistent U.S. fiscal deficits and ongoing monetary expansion have sped up this currency depreciation and prompted a revaluation of gold.
The dollar index and gold price clearly move in opposite directions. Since the start of 2025, the dollar index has declined nearly ten percentage points, favoring the gold rally. But since October, the dollar index has stabilized, potentially limiting further gold gains.
The report points out that increased economic and political tensions have further challenged the dollar's credibility. Affected by Trump’s tariff policies and intensifying domestic partisan conflict, the U.S. Economic Policy Uncertainty Index has surged since the start of 2025, jumping from around 100 to over 400 by April.
Globally, the share of the U.S. dollar in reserves has been steadily declining, from nearly 80% in 1970 to about 60% now. Every drop in the dollar's share of reserves has coincided with strong gold price surges.
Additionally, stablecoins and other digital assets may impact traditional fiat currency markets, further challenging the dollar’s global status — a trend that could support a continued gold bull market.
Commodity Attribute: Central Bank Buying and Investment Demand Soar
According to the report, gold supply trends are relatively stable and grow slowly. Because the gold mining cycle is long, it is difficult to rapidly adjust supply in response to price changes in the short term, so supply elasticity is limited.
There have been significant changes on the demand side. Jewelry demand's share has fallen from around 50% before 2020 to 32% in the first three quarters of 2025.
Central bank gold buying has risen dramatically since 2020, from 255 tons to 1,089 tons in 2024, with an annual growth rate of 44%. The share of demand from central banks has risen from 5% to 22%. As of September 2025, global gold reserves’ share has climbed to about 29%.
Looking at representative economies, gold reserve ratios are 50% in Europe, 77% in Italy, 78% in France, and 8% in China — all the highest levels since 2020. This growth trend continues and has become a major driver of higher gold prices.
Investment demand is also robust. Investment’s share of demand reached 38% in 2020, and hit 42% in the first three quarters of 2025, a new high.
Net gold ETF holdings have risen by 170 tons, up 20%, since the start of 2025. The total value of these holdings is up over $60 billion, a rise of more than 80%. As of September 23, 2025, non-commercial long positions in COMEX gold futures are up 14% year-to-date, accounting for 83% of open interest.
Financial Attribute: Interest Rate Pricing Framework Partially Fails
The report notes that real interest rates and gold prices have traditionally shown a negative correlation, which has explained some of gold’s rally since 2000. Since 2008, global QE and zero interest rate policies have pushed real yields into negative territory.
However, since 2021, the negative pricing relationship between real rates and gold has gradually failed. High inflation may distort real interest rates themselves, making gold more attractive as an inflation hedge and weakening interest rates’ pricing power over gold.
In early 2022, after the outbreak of the Russia-Ukraine conflict caused stubborn inflation and a global supply chain reset, the Fed began 11 rounds of rate hikes and real yields soared from deep in negative territory.
From a stock relative valuation perspective, the S&P 500-to-gold price ratio is now near its average since 1971, reflecting that gold may be fairly valued relative to the S&P 500, although it is still far from previous cycle peaks.
Three Key Variables in This Cycle
The report states that in comparison across the three gold bull cycles, this cycle displays three notable unusual indicators, which will determine the future trend in gold prices.
On geopolitical risk, the Geopolitical Risk Index has climbed 72% in this cycle, similar to the previous cycle and approaching levels seen during the 2008 global financial crisis.
Since 2020, major events including the COVID pandemic, the Russia-Ukraine conflict, and trade sanctions have significantly raised the Geopolitical Risk Index. As of October 31, 2025, consumer confidence is down 41% from January 2019.
On gold reserves, global central banks’ strategic accumulation of gold is a key difference from the previous two cycles.
During this cycle, the share of gold in global reserves has risen by 167% cumulatively, and 23% this year, compared to just 6% in the previous cycle.
According to the World Gold Council, net central bank gold purchases worldwide reached 634 tons in the first three quarters of 2025—slightly below the recent three-year highs, but still well above pre-2022 averages.
On real interest rates, in the previous two cycles, real rates were slightly positive or slightly negative and showed a long-term downward trend.
In this cycle, real rates have increased by 213%. This is related to the low-rate, high-inflation environment since 2020 and also demonstrates the ineffectiveness of the prior interest rate pricing framework during this period. Only at the end of 2024 did the Fed begin rate cuts, and real rates started to fall but remained at relatively high levels.
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