Recent geopolitical tensions have led to significant volatility in gold prices. ZOFM fund manager Ren Fei analyzed that the core drivers of gold prices can be viewed from both long-term and short-term perspectives. In the long run, prices depend on the U.S. fiscal deficit rate, which reflects the scale of government debt and creditworthiness. In the short term, they are primarily influenced by the extent of monetary policy easing. The sustained upward trend in gold over the past four years has resulted from growing market concerns over the expanding U.S. fiscal deficit and government debt. This rally accelerated further after the Federal Reserve entered an interest rate cut cycle.

Regarding the recent decline in gold prices following the outbreak of conflict involving the U.S., Israel, and Iran, Ren Fei noted that, in the short term, the conflict has significantly driven up international oil prices. This has reignited inflation expectations, which were previously moderating, leading to renewed market anxiety. At one point, there were even expectations that the Fed might resume raising interest rates by 2026. Such developments directly constrain the room for monetary policy easing, thereby exerting noticeable pressure on gold prices.

Despite short-term adjustments, Ren Fei remains optimistic about gold's long-term trajectory, citing two key reasons. First, the conflict involving the U.S., Israel, and Iran is likely to evolve into a prolonged stalemate, potentially returning to negotiation and strategic maneuvering. Throughout this process, U.S. debt pressures are expected to accumulate further, continuing to strain its monetary credibility. Second, in terms of policy choices between interest rate hikes and cuts, the U.S. is unlikely to shift toward tightening. To alleviate government debt servicing pressures and support development in areas such as artificial intelligence, monetary policy will need to remain accommodative, with potential interest rate cuts still necessary. Therefore, a substantial tightening of the monetary environment appears improbable.