BlockBeats News, July 14th - The price of gold has retraced approximately 25% from its all-time high earlier this year, mainly driven by rising interest rates, a strong US dollar, and increasing energy costs, which have elevated holding costs and put significant short-term pressure on the price. However, several market participants believe that this correction has not altered gold's long-term investment thesis.

Sprott's market strategist, Paul Wong, stated that the recent decline in gold was primarily influenced by a strengthening US dollar, a growing expectation of Fed rate hikes, and the unwinding of quantitative fund positions. He believes that the current drop in gold price has exceeded the actual rise in the US dollar and short-term interest rates, indicating that the bearish impact of high rates and a strong dollar has largely been absorbed by the market.

Paul Wong pointed out that a short-term rally in the US dollar often suppresses gold performance. However, in the long term, a stronger dollar drives greater global demand for alternative reserve assets, thereby bolstering gold's strategic position as a neutral reserve asset. With expanding global fiscal deficits, central banks' ongoing gold purchases, and escalating geopolitical fragmentation, gold is gradually transitioning from a mere inflation hedge to a currency hedge, a reserve asset, and even a potential international financial collateral.

He believes that in the future, gold and the US dollar may simultaneously strengthen in the long term due to different rationales: the US dollar benefits from its central role in the global financing system, while gold benefits from the global trend of reserve asset diversification. However, on a cyclical basis, gold prices still tend to exhibit a negative correlation with the US dollar index.