Why does gold keep swinging back and forth between high and low levels? It looks complicated, but actually only four logical factors are at play.

First, we need to look at the Federal Reserve's pace. When a rate cut cycle begins or prices soar too quickly, the yield on bank deposits and loans decreases, and funds tend to flow into tangible assets like gold for preservation and appreciation. Conversely, when the Fed starts raising interest rates and Treasury yields go up, funds shift to the bond market seeking interest income, and gold's attractiveness naturally diminishes.

Second is the US dollar as the anchor. Gold is globally priced in USD. When the dollar appreciates, international buyers need to spend more of their local currency to buy gold—reducing purchasing power and demand. When the dollar depreciates, gold becomes cheaper, foreign capital floods in, and gold prices soar.

The third factor is geopolitical situations and economic expectations. When risks like wars, political turmoil, or stock market crashes occur, investors immediately turn to gold as a safe haven. But when the economic cycle improves and corporate earnings prospects look good, funds flow back into equity markets seeking returns, and gold becomes less favored.

Finally, do not overlook the power of market microstructure. When prices are high, large funds start to take profits and cash out, while algorithmic trading programs automatically trigger pullback orders. These technical actions often cause rapid adjustments in gold prices. With many market participants involved, these forces intertwine, resulting in seemingly irregular fluctuations in gold prices.