The gold conversation has become somewhat divided in recent days.

After surging to nearly $4,700, prices pulled back to around $4,100 before and after the holiday period. That several-hundred-dollar gap revived talk that gold's rally might be over. But the turning point arrived faster than expected.

Fresh data showed the U.S. added only 29,000 nonfarm jobs in September, well below the 90,000 consensus estimate, while the unemployment rate rose to 4.2% and average hourly earnings slowed to 3.0% year over year.

After the release, bets on further Fed tightening in October fell sharply, the pricing chain of "strong employment, sticky inflation, continued tightening" that had held since September was broken, gold rebounded quickly, and gold-related stocks posted solid intraday gains.

More noteworthy than the short-term catalyst is what long-term money is doing.

The latest central bank data showed that as of the end of September, China's gold reserves stood at 77.47 million ounces, up 740,000 ounces month over month, equivalent to about 23 tonnes.

This marked the 23rd consecutive monthly increase since the central bank resumed purchases in November 2024, and the single-month increase was even larger than in August.

At the same time, World Gold Council data showed that global gold ETFs attracted about $10 billion in inflows in September, pushing third-quarter inflows to a record $31 billion.

Even as prices rise and fall, buying has kept increasing 鈥?the driver of this gold cycle has never been short-term price swings.

Why "smart money" buys more as prices fall

Look at central banks first.

Since March of this year, the central bank's monthly purchases have climbed from 160,000 ounces all the way to 740,000 ounces, with momentum increasing month by month.

This "buy more as prices fall" pattern shows that central bank gold buying is a classic strategic allocation behavior.

Then look at global allocation funds.

World Gold Council data showed that global gold ETF holdings rose to a record high of 4,256 tonnes in September.

Prices spiked in late September and then fell quickly, yet money flowed in against the trend 鈥?institutions were using the pullback window to finish allocating.

According to the traditional framework, we are in a rate-hike cycle, gold is not an interest-bearing asset, and its appeal should decline. So why are these "smart money" players adding positions instead?

The answer is that this gold cycle's driver has already shifted from "real interest rates" to "credit."

In the traditional model, gold pricing is anchored to real rates: rate hikes lead to higher real rates, a higher opportunity cost of holding gold, and pressure on prices. That logic has worked repeatedly over the past two decades.

But a subtle and profound shift is happening in the market 鈥?what the market fears is precisely the "safest asset" itself.

Currently, U.S. fiscal deficits continue to expand, long-term Treasury yields are trending higher at the center, and dollar credit is being repeatedly worn down in one policy battle after another.

When the so-called "risk-free asset" begins to show credit cracks, gold, the oldest form of money, becomes the ultimate option for hedging credit risk.

The short-term factors weighing on gold prices are also loosening.

The dollar index has weakened slightly, U.S. Treasury yields have pulled back, and September U.S. employment data cooled, raising the probability that the Fed will stay put in October.

What needs to be distinguished here is that the upward shift in the center of long-end Treasury yields comes from debt supply and credit premiums, which are structural factors; the recent modest pullback in Treasuries is driven by rate-hike expectations and short-end real rates, which are cyclical factors.

The former supports gold's long-term logic, while the latter affects the short-term tightness of gold prices.

With both forces combined, gold briefly fell to a stage low on Oct. 7 and then rebounded quickly. By the afternoon of Oct. 9, London spot gold had returned above $4,100, and the gold sector led the market.

Over a longer horizon, the structural demand from central bank gold purchases still has ample room and continues to provide support; long-term demand from geopolitical conflicts and reserve diversification remains, and gold's medium- to long-term allocation value is still solid.

Pick the right tool, and hold it long enough

Even if you are equally bullish on gold, there are actually two ways to participate.

One is to hold physical gold exposure. Guotai Gold ETF (518800) directly tracks domestic gold prices. The other is to hold the gold industry chain. Guotai Gold Stock ETF (517400) focuses on leading companies in the gold industry chain and, under the triple catalysts of U.S. debt credit repricing, central bank buying dominating pricing, and a possible bottom in gold prices, is a core tool for positioning in gold-related industries.

The difference between the two comes from asset attributes.

When gold prices rise, miners' extraction costs are relatively rigid, so profits are clearly amplified and share price elasticity is often stronger than gold prices; but the underlying asset is still equities, so it may also adjust when the broader equity market falls.

For example, on Oct. 8 the market generally corrected and gold stocks fell in tandem; on Oct. 9 the three major indices were still down, yet gold stocks rebounded against the trend intraday 鈥?the same sector displayed its two attributes on two different days.

Against the backdrop of a rising center for gold prices, miners' profit elasticity is greater than gold price elasticity. Combined with valuations in the gold stock sector sitting in a reasonable range after an earlier pullback, if the center of gold price fluctuations moves higher, gold stocks may outperform gold itself.

For investors who want more direct exposure to gold itself, Guotai Gold ETF (518800) is a more direct allocation tool; for investors who want to capture profit elasticity in the industry chain and can accept greater volatility, Guotai Gold Stock ETF (517400) may deserve close attention.

But choosing the right tool is only the first step.

The driver of this gold cycle comes from structural changes measured in years 鈥?deficit expansion, credit repricing, and reserve diversification 鈥?and the corresponding holding period should also be long term.

In the short term, gold may still be disturbed by the dollar, real rates, and sentiment, and phased allocation may bring a better investment experience.

More importantly, place gold in the allocation role within a portfolio, letting it play the part of diversifying risk and hedging credit concerns, complementing equity assets, rather than treating it as a tool for short-term trading gains.

Guotai Gold ETF (518800) feeder A: 000218 feeder C: 004253 feeder E: 022502

Guotai Gold Stock ETF (517400) feeder A: 021673 feeder C: 021674

Risk warning: Short-term fluctuations in international gold prices, indices, and other factors are for reference only, do not represent their future performance, and do not constitute a promise or guarantee of fund performance. Views may be adjusted as the market environment changes and do not constitute investment advice or a commitment. Guotai Gold ETF mainly invests in spot gold contracts, and its expected risk-return level is similar to that of gold assets, differing from equity funds, hybrid funds, bond funds, and money market funds. The feeder fund mainly invests in Guotai Gold ETF, and its expected risk-return level is similar to that of gold assets, differing from equity funds, hybrid funds, bond funds, and money market funds. Guotai Gold Stock ETF and its feeder fund are equity funds, and their expected return and expected risk levels are theoretically higher than those of hybrid funds, bond funds, and money market funds. This fund is an index fund that mainly adopts a full replication strategy and tracks the underlying index, and its risk-return characteristics are similar to those of the market portfolio represented by the underlying index. If you need to purchase related fund products, please pay attention to the relevant investor suitability management rules, complete risk assessments in advance, and purchase fund products that match your own risk tolerance. For fund fee rates, please refer to the legal documents.