Fund Manager: Gold Price Pullback Presents a Good Opportunity for Positioning, Short-term Volatility Does Not Change the Long-term Bullish Logic

Currently, multiple short-term bearish factors continue to suppress gold prices, resulting in a significant price correction. A senior portfolio manager of a well-known asset management product has raised a new perspective, arguing that this pullback is not a reversal but instead creates a high-quality entry opportunity for mid- and long-term investors. The underlying logic of de-dollarization driving gold's long-term bull run remains solid, complemented by rising global inflation anchors and continued diversification of central bank reserve portfolios, leaving significant upside potential for gold by year-end. Short-term interest rate volatility will only bring about temporary swings.

Jerry Prior, COO and senior portfolio manager of Kraneshares Mount Lucas Managed Futures Index Strategy ETF (NYSE: KMLM), stated in an exclusive interview,

Prior noted: "Speculative funds, sovereign trading desks, and systematic trend-tracking funds exited the market collectively, jointly resulting in this round of gold price correction. The market's speculative positioning structure has now reversed to the extreme, with most bearish expectations being fully priced in."

He further explained that even if gold briefly dips below $4,000 per ounce in the short term, it would only be a temporary move. Once the Middle East oil supply chain stabilizes, central banks will resume gold purchases to replenish reserves and provide a price floor for gold.

The structural benefits of de-dollarization are long-term, and the trend of central bank gold buying is hard to reverse

Jerry Prior believes that the core long-term variable in the gold market in recent years is the global shift to reduce the share of dollar-denominated assets and promote reserve diversification. The instrumentalization of the dollar is the key driver behind central banks' continued gold accumulation, and this trend is unlikely to reverse in the short term.

He commented: "The secular gold bull market is fundamentally driven by the global de-dollarization process. Countries are seeking stable stores of value beyond the dollar and U.S. Treasuries. Even if Middle East oil exporters resume oil shipments and cash flows return, new capital surpluses will not flow heavily into U.S. Treasuries but will continue to enter the gold market."

Short-term interest rate disturbances cause volatility; investors should focus on the macro long-term narrative

While bullish on gold's long-term outlook, Prior does not overlook short-term risks. He states that persistently rising market interest rates and stabilizing inflation expectations may suppress gold's performance temporarily. Gold is a non-yielding asset, and rising rates increase its opportunity cost. Even in high-inflation environments, gold prices may weaken.

He stated: "Gold is an important defensive allocation in an asset portfolio. Most retail investors who previously piled in have already exited. Now, entering the market does not have to worry excessively about panic selling causing heavy losses. Investors should not let short-term rate volatility cloud their judgment but should focus on the macro-structural long-term story."

He further elaborated that supply chain reshoring and the restructuring of the global supply chain have broken the low inflation environment brought by past globalization. In the future, the inflation anchor will remain higher than pre-pandemic levels, and the previous reliance on low-priced imported goods to keep developed economies' inflation low will no longer hold. Inflation is unlikely to return to the lows of the past twenty years.

Year-end gold price upside is clear; the correction is only a phase of the long-term bull market's consolidation

Bringing together all macro conditions, Prior believes that this gold price correction does not mark the start of a bear market. It is merely a normal technical adjustment within a long-term upward cycle. As central bank buying returns and de-dollarization continues to channel incremental funds to gold, year-end prices are likely to rise to around $4,500 per ounce.

He said: "Ongoing de-dollarization, combined with restored Middle East oil production, will attract substantial long positions back into the market, fueling a new round of gains for gold."

Conclusion

In summary, short-term Federal Reserve tightening expectations and ebbing safe-haven sentiment have resulted in a temporary gold price correction, but the market has already largely priced in downside risks. The three structural supports of de-dollarization, global reserve diversification, and persistently high mid- to long-term inflation remain effective, and short-term volatility will not change the long-term gold bull trend.

This adjustment is providing investors with an optimal window to position themselves. Looking ahead, once Middle East oil supply resumes and central bank gold buying recovers, gold prices are likely to rebound, with year-end upside clearly defined.

Editor: Zhu Henan