CICC: US policy and economy have yet to show an inflection point, or continue to maintain an excess of gold
The Zhitong Finance App learned that CICC released a research report saying that the price of gold recently broke through 4,500 US dollars/ounce and reached a record high. The reason behind this is the support of three factors: the Federal Reserve's restart of the easing cycle, the decline in the US dollar's reputation, and the escalation of global geopolitical risks. The bank believes that whether US debt and fiscal deficits expand, or whether global central banks are speeding up gold purchases, have limited significance in indicating the top of the gold bull market. Currently, the Federal Reserve is still in an easing cycle, and the US economy is still plagued by stagflation. Therefore, until we see an inflection point in US policy and economy, the gold bullish market may continue to maintain an excess of gold. Furthermore, Chinese stocks continue to benefit from the wave of AI technology and abundant liquidity, and the current valuation is reasonable, and has yet to see signs of a top bull market. Therefore, the bank is firmly optimistic about the revaluation of Chinese assets and maintaining an overbalance of Chinese stocks.
CICC's main views are as follows:
Why did gold rise sharply?
Recently, the price of gold once broke through 4,500 US dollars/ounce and reached a record high. The reason behind this is the support of three factors: first, the Federal Reserve restarted the easing cycle. After keeping the policy interest rate level unchanged for 9 months, the Federal Reserve restarted cutting interest rates in September this year. It has already cut interest rates three times by 25 bps each, and announced that it will begin purchasing short-term treasury bonds in December to expand the central bank's balance sheet and inject liquidity into the market. Entering 2026, the Federal Reserve's forward-looking guidance indicates that interest rates may continue to be cut next year. The Federal Reserve's currency generally tends to ease, supporting the performance of gold.
The second was the decline in the dollar's credibility. After the epidemic, the US fiscal deficit rate rose to around 6%, far higher than the pre-epidemic center. National debt accumulated rapidly, leading to an increase in debt risk. Furthermore, US President Trump's intervention in the Federal Reserve's decisions has increased recently. Current Federal Reserve Chairman Powell will step down after the end of office in May 2026. Trump is about to nominate a new chairman of the Federal Reserve. Investors are concerned about the decline in the independence of the Federal Reserve. The combination of fiscal and monetary factors has reduced investors' confidence in the US dollar system and US dollar assets, causing the US dollar to enter a depreciation cycle. The US dollar index has already fallen by about 10% this year. Gold has monetary properties, is an alternative to the current US dollar system, and benefits from the credit split in the US dollar.
Finally, there is the escalation of global geo-risk. Gold has safe-haven properties, which are relatively beneficial at this time. At the same time as gold surged, silver rose even more, which may be affected by factors at the industrial supply and demand level. Because silver has industrial properties, demand is highly sensitive to the manufacturing cycle and the new energy industry. Global demand for silver continued to increase in 2025 in fields such as photovoltaic installations, new energy vehicles, electronics and electrical equipment, while the supply-side expansion of silver was limited, leading to a tightening of supply and demand margins.
How long can gold keep rising?
The current round of the gold bull market has continued for 3 years, rising 2.7 times, and the market's grand narrative has begun to show a trend of perpetuating the rise in gold. Since the fourth quarter of 2022, the CICC Asset Group has proposed an overallocation of gold for 3 consecutive years, but the bank believes that the price of gold will not rise forever. The bull and bear switch is a normal phenomenon. It is not appropriate to use grand narratives to guide investment decisions; instead, it should use data models to objectively analyze asset operation rules. The bank sorted out the characteristics of the world's major asset classes and found that the total duration of the gold bull market and bear market was relatively balanced, and that a single bear market lasted the longest among the major asset classes.
Therefore, after 3 years of sharp rise in gold, it is now necessary to study the general rules of the end of the gold bull market and prepare ahead of time. The bank previously systematically revisited the top of the five-round gold bull market in history, and found that the Federal Reserve's clear tightening of monetary policy and a fundamental improvement in the US economy (upward growth and downward inflation) were the most effective signs of a bull market top.
Whether US debt and fiscal deficits are expanding, or whether central banks around the world are speeding up gold purchases, have limited significance in indicating the top of the gold bull market. Currently, the Federal Reserve is still in an easing cycle, and the US economy is still plagued by stagflation (declining growth, rising inflation). Therefore, until we see an inflection point in US policy and economy, the gold bull market may continue, and the bank maintains an excess of gold.
How much more can gold rise?
At the beginning of 2024, the price of gold rose from a low of 1,640 US dollars/ounce in October 2022 to around 2,000 US dollars/ounce. However, the bank firmly believed that gold was not overvalued, proposed that the traditional pricing framework was failing, and for the first time used a four-factor model (actual interest rate, US dollar, central bank purchase, and US debt size) to systematically explain and forecast the price of gold, and proposed that the price center of gold was 2,400 US dollars/ounce.
In January 2025, the bank upgraded to gold model 2.0 and raised the long-term gold price forecast to 3,300-5,000 US dollars/ounce.
Currently, gold has risen to around 4,500 US dollars/ounce, which has reached the bank's long-term price forecast ahead of schedule. Based on current fundamental index values, in fact, the price of gold is already significantly higher than the short-term valuation center calculated by the model, and there may be a certain bubble.
Since the Federal Reserve's policy and the US economy have yet to reach an inflection point, the gold bull market may not be over. However, after the price of gold has separated from the fundamental indicators and fits the model, market fluctuations may increase significantly, and it is more difficult to predict specific points. The bank suggests downplaying gold price point predictions and paying more attention to when asset trends change. The bank expects that at the beginning of 2026, due to the continued rise in US inflation and marginal improvement in US growth, the Federal Reserve may slow down the pace of easing or put a phased pressure on the performance of gold. However, looking further ahead, with the inauguration of the new chairman of the Federal Reserve in May 2026, US inflation ushered in a downward inflection point in 2026H2, and the Federal Reserve may once again accelerate interest rate cuts, providing new support for the continued rise of gold. Therefore, the future gold bull market may not be a one-sided market, but will fluctuate along with the Federal Reserve's policy and US economic trends.
The above logic also applies to commodities such as silver. Since the market size of silver is smaller and its liquidity is relatively lower, the price fluctuation is likely to be greater than that of gold.
Asset allocation suggestions: maintain overallocation of gold, seize short-term opportunities and liquidity spillover opportunities, raise commodities to standard, maintain overallocation of Chinese stocks, low allocation of Chinese bonds, standard allocation of US stocks and US bonds
Gold rose a lot this year, and its valuation was too high. In early 2026, the Fed's easing expectations declined in stages, which may become a source of risk. Considering that the Federal Reserve will eventually accelerate easing again next year, if there is a clear correction in gold prices early next year, it may be an opportunity to increase allocations due to dips. After the sharp rise in gold, commodities such as copper and silver have also performed strongly recently, partly reflecting the spillover effect of gold's liquidity. In addition to this, commodities can also hedge against geopolitical risks and the risk of the US economy overheating. The bank has proposed raising the product to standard in its annual outlook, and is particularly optimistic about non-ferrous metals. At the same time, the bank suggests that metals such as silver are smaller in size and less liquid than gold. If gold fluctuates next year, the risk of a pullback is also greater. It is recommended to control the risk to avoid blindly rising.
Chinese stocks continue to benefit from the wave of AI technology and abundant liquidity, and their current valuations are reasonable, and they have yet to see signs of a top bull market. Therefore, the bank is firmly optimistic about the revaluation of Chinese assets and maintaining an overbalance of Chinese stocks. Stylistically, since the steady growth policy is relatively moderate, the market style may still be dominated by technological growth in the short term, and the shift in cycle and value style still needs to wait for more clear economic or policy signals.
Interest rates on Chinese bonds are already at a low level, and the valuation is relatively high, and the market's carrying capacity for long-term bonds is limited. The possibility that the interest rate curve will become steeper is rising, so it is recommended to maintain a low allocation of Chinese bonds.
In terms of overseas assets, US stocks also benefit from macro-liquidity and AI industry trends, but the flexibility in the US dollar depreciation cycle is low, compounded by concerns about high valuations, and it is highly risky to pursue higher risks, and it is recommended to maintain the standard US stock market.
At the same time, it is important to note that if the US economy experiences a phased recovery in growth and inflation in the first quarter of next year, there is a possibility that the growth value style will change. As for US debt, rising inflation and declining easing expectations at the beginning of next year may cause disturbances. After the implementation of the “Big Beauty Act” at the beginning of the year, the scale of US fiscal debt issuance increased. If “equal tariffs” are overturned by the Supreme Court, there is also a risk of phased increases in US debt to raise capital, which may also hurt the performance of US debt. Therefore, the bank proposed continuing to standard US debt in the short term.
Looking at the medium term, the market now only expects the Fed to cut interest rates twice in 2026; the bank thinks it is too conservative. The new chairman of the Federal Reserve will take office in May next year, and US inflation may enter a downward cycle in the second half of the year. The Federal Reserve will conditionally cut interest rates more than 2 times, and the ten-year interest rate may also follow the trend and fall to around 3.5%. The bank suggests waiting patiently for the time when the US debt allocation increases.