When the Federal Reserve lowers interest rates, gold often falls, and there is historical evidence for this. In the past thirty years, during six rate cuts, gold has dropped over 15% within three months on five occasions, which is not a coincidence. The trick in the capital markets is to speculate on expectations in advance and then sell off once the news materializes. For example, in the fourth quarter of last year, everyone was betting on a rate cut in June this year, and gold ETFs aggressively built positions, pushing the gold price from 2600 to 3000. As a result, when the Federal Reserve said in March that it would not cut rates, institutions quickly reduced their positions, leading to a price correction.

At the beginning of this year, Chinese mothers rushed to buy gold jewelry, only to encounter a price correction, resulting in a 10% loss including processing fees. In April, Trump threatened to fire the Federal Reserve Chair, causing the gold price to plunge from 3300 to 3000, leading many leveraged gold traders to face liquidation. Later, due to countries jointly retaliating against tariffs, gold slowly rose back and even reached new highs.

The trend of gold is essentially a game of chess between the Federal Reserve and the White House. The United States holds the most gold and controls the dollar system, so it is crucial to closely monitor the Federal Reserve’s movements. Remember, when everyone is shouting to buy gold due to rate cuts, it is often the most dangerous time. Do not exceed a 10% position in gold investment, and be sure to set stop-loss orders. The harshest truth of the capital markets is: when the retail investors cheer, the scythe is about to swing down. Compared to making money, preserving capital is the top priority.

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