Why is gold no longer a "store of value"?

Ask AI · Why Is It Hard for Precious Metals to See a Major Rally When Currency Values Are Stable?

(The author of this article is Xu Bin, a professor at the School of Accounting, Central University of Finance and Economics)

In recent times, precious metals prices have continued to pull back, and the appeal of gold investment has weakened significantly. Why have precious metals with long-term allocation value been in a temporary slump? How should investors establish a systematic perspective to understand the logic of how capital markets operate?

Precious metals are called “precious metals” primarily because of their scarcity of supply and their natural value-preserving properties—this is also why gold, silver, and others once carried long-term functions in currency circulation. However, when precious metals no longer play the role of the “cushioning rock” in a currency, their value returns to the level of use value, mainly reflected in decorative uses such as gold and silver jewelry. Prices then shift to being determined by market supply and demand. From this, it can be seen that in an environment where a country’s currency value is overall stable, precious metal prices find it difficult to surge significantly; ultimately, their value fluctuations depend on the supply-and-demand game at the commodity level.

Second, in market conditions where the value of precious metals is no longer prominent, how should investors make precise allocations? Here, what we emphasize is investment, not speculation: investment focuses on the underlying intrinsic value of the asset, while speculation chases short-term price fluctuations. Technical trends in capital markets are hard to predict accurately for the future; various technical charts, in essence, are only records of historical prices and cannot accurately forecast the direction ahead. There are numerous cases in the market where speculators, driven by excessive faith in technical analysis, were ultimately harvested by the main capital and ended up losing everything.

Therefore, it is evident that truly mature investors usually have a long-term investment horizon. Through in-depth research into companies’ financial conditions, they can grasp the asset’s real value. Even if they cannot capture profits from short-term price spreads, they can still share in the benefits of an asset’s long-term growth, avoiding severe losses. This is also an important reason why overall volatility in mature markets tends to be relatively smooth. If you lack the ability to interpret financial statements, choosing products such as allocation funds and bonds is also a sound way to manage risk and seek protection.

So, how should ordinary people participate in the stock market today?

The key is to combine your own risk tolerance and act within your means. Investors with a higher risk appetite can invest in the stock market, focusing on high-growth sectors such as information technology, new energy, and artificial intelligence. But these industries can be highly volatile, so you must select targets carefully and allocate rationally. Meanwhile, risk-averse investors are better suited to defensive sectors such as agriculture, forestry, animal husbandry, and fisheries, as well as water, coal, power, and electricity-related industries. These sectors have stable operations and solid cash flows; their inherent stability is itself an important support for stock prices.

First Finance’s exclusive one-account release. This article only represents the author’s views and does not constitute investment advice.

(This article comes from First Finance)