In the current global economic landscape, the world is exhibiting a certain degree of disorder, which is caused by the friction effects arising from the intense competition among various global forces during the transition between economic cycles, filled with numerous uncertainties. As the two largest economies in the world, the competition between China and the United States undoubtedly constitutes the core melody in the global power game.

Recently, a phenomenon that has puzzled many market observers is that despite the Federal Reserve having implemented two interest rate cuts and entering a rate-cutting cycle, the US dollar index has not fallen but has risen, continuously setting new high records. From a conventional economic logic perspective, the start of a rate-cutting process by the Federal Reserve usually triggers expectations of dollar depreciation, but the reality contradicts this. The reasons for this abnormal phenomenon are complex and multifaceted.

Firstly, market expectations for a 're-inflation' in the US in 2025 have shown significant warming. Although the current inflation data will not temporarily interfere with the Federal Reserve's decision to continue its rate-cutting in December, uncertainty regarding the economic outlook for next year has significantly intensified. Especially considering that after Trump takes office next year, he is likely to introduce a series of measures such as tariffs and tax cuts, these policies are expected to further push up domestic inflation levels in the US, leading the market to predict a potential slowdown in rate cuts next year, which constitutes an important driving force for the dollar's rise.

Secondly, globally, it is not just the US that is implementing interest rate cuts; many countries, including the EU, the UK, Canada, and Switzerland, have also entered a rate-cutting cycle. Moreover, many Western countries began their rate cuts earlier than the US, and the pace of their cuts has been more aggressive. For example, the European Central Bank has already implemented its fourth rate cut this year, and the Bank of Canada has cut rates by a cumulative total of 175 basis points this year, while the US has only cut rates twice this year, totaling 75 basis points. Compared to other allied countries, the US's rate cuts appear relatively mild, which allows the dollar to maintain a relatively high interest rate level, thus attracting a large influx of funds into the US market. Meanwhile, the exchange rates of the US's allied countries have shown a clear weakening trend against the dollar, further supporting the strong performance of the dollar index.

Furthermore, the market is reacting to the expectation that Trump may implement tariffs against many allies after taking office next year. Due to this expectation, the market shows deep concern about the economic development prospects of the US's allied countries next year, prompting a large amount of funds to layout in advance and flow into the US market. This trend of capital flow not only explains why US stocks rose after the Federal Reserve's interest rate cuts, but also elucidates why US stocks continue to rise under the backdrop of rate cuts. To some extent, the allied countries of the US play an important role as a source of capital supply and economic buffer under the dollar hegemony system.

From the macro-strategic perspective of the US, maintaining the dollar's hegemonic position in the global monetary system is always a top priority, and the core support element of dollar hegemony lies in ensuring the continuous appreciation of the dollar. As long as the dollar can maintain an upward trend, capital will continuously flow into the US from around the world, continuously injecting vitality into the US economy and masking many structural problems and potential risks it faces. However, under the macro background of global interest rate cuts, the upward trend of the dollar is difficult to sustain in the long term. The current upward trend of the dollar is like performing a dance with shackles; once its upward momentum wanes, many hidden problems will gradually be exposed to the public eye.

The continued rise of the dollar has significantly suppressed the gold market, causing gold prices to fall in the short term. Meanwhile, after a six-month hiatus, the People's Bank of China has restarted its gold accumulation operations. In November of this year, China's official gold reserves increased by 4.5 tons. The People's Bank of China's decision to increase its gold holdings after halting purchases for half a year carries multiple strategic intentions. On one hand, this move helps to enhance the proportion of gold assets in China's foreign exchange reserves, increasing the stability and risk-resistance capacity of its foreign exchange reserves; on the other hand, by increasing gold holdings, it can help stabilize the renminbi exchange rate to some extent, and it cannot be ruled out that the People's Bank of China has potential considerations to drive up gold prices through increased holdings.

In the context of global turmoil, the US often exhibits a state of excitement, as safe-haven funds typically flow into the US, thereby pushing up the dollar's value, while some funds flow into the gold market. The US, leveraging its dollar hegemony, conducts economic 'extraction' operations on its allied countries, while also driving up bitcoin prices and attracting a massive influx of global funds into the US market, during which time gold prices correspondingly decline.

The continued accumulation of gold by central banks around the world has had a significant impact on the global flow of funds. By increasing gold holdings, central banks push up gold prices, effectively redirecting part of the safe-haven funds that would have originally flowed into the US and intercepting resources that were originally planned to flow into the US. Additionally, countries have also taken action to reduce their dollar reserves, selling off US Treasury bonds, although the upward trend of the dollar has somewhat obscured the true scale and extent of countries' reductions in dollar reserves.

However, the current global economic game is merely a beginning. As the two major powers in the global economic landscape, China and the US have already initiated their 'extraction' effects, releasing key signals. According to the information conveyed from this month's high-level meetings, China will implement a 'moderately accommodative' monetary policy in 2025, which means that China will once again initiate a large-scale monetary easing process to attract capital inflow from around the world. Meanwhile, the US is also in a state of attracting capital inflow from around the world, but given that it is in a rate-cutting cycle and has not simultaneously implemented a balance sheet expansion policy after the rate cuts, continuing instead with a balance sheet reduction process, this series of actions is essentially the US's last desperate measures on the eve of a crisis. The massive debt problem and fiscal deficit accumulated by the US through unlimited borrowing are expected to erupt within the next four years, coinciding with Trump's four-year term. At that time, the world may face an unprecedented financial collapse and financial storm, marking a critical turning point for a significant shift in the global capital market pattern of 'the East rises while the West falls', profoundly reshaping the global economic and financial order.
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