Guojin Securities: After the highest single-year increase in the past 46 years, how do you view the trend of gold?
The Zhitong Finance App learned that Guojin Securities released a research report saying that although the central bank's gold purchase pace slowed down in 2025, the influx of speculative capital drove up gold prices. The short-term pullback was mainly driven by sentiment and technical factors, while the core supporting logic of global stagflation, chaos, and monetization of the US deficit remained unchanged. Looking ahead to 2026, when the market's pricing logic of “AI unknown” has not changed, lack of order is still a favorable environment for gold. When AI foam and gold form a “dumbbell,” gold has achieved the value of bright moments as insurance for AI holdings. As a narrative asset with both “gold-like” attributes and AI power related, silver is more flexible in stages. However, once the AI narrative becomes clear and the golden moment or comes to an end, the silver narrative that “benefits both sides” may return to rationality at that time.
Guojin Securities's main views are as follows:
Taking history as a guide, is gold currently “soaring”?
1. Looking back at the history of gold prices, the stages with strong references were the World War II period and the 70s of the last century, respectively
After the stock market crashed in 1929, America fell into a major economic depression, and the banking system was on the verge of collapse due to people crowding out gold. Under the gold standard, the issuance of US dollars must be linked to gold reserves. This limits the government's ability to solve problems by issuing currency. Banks have gone out of business in large numbers, and ordinary people have lost a large number of jobs. Therefore, after the US Roosevelt New Deal in 1933, it was announced that all banks in the country must stop trading gold and return gold to national ownership.
After the outbreak of World War II, the US fiscal deficit rate once rose to 27%, and the Federal Reserve stabilized the latter's market interest rate through unlimited treasury securities purchases. As a result of this measure, the total base currency of the US increased by 149% from August 1939 to August 1948. Meanwhile, dollar-denominated gold rose 123% over the same period.
During the Bretton Woods system, the price of gold was fixed at $35 per ounce. However, after World War II, the US economy took off, and international trade was settled in US dollars. Due to the continuous expansion of the economy, there were more and more US dollars. As a result, US inflation increased rapidly, and the balance of international payments support continued to be deficient, and it had to rely on issuing currency to make up for it. As a result, inflation further intensified, and the credit of the US dollar once faced collapse.
Since the 70s, the world began to crowd out gold, US gold reserves have declined, and the US is worried that it will not be able to continue to support the exchange promise between the US dollar and gold. The Brinton Woods system collapsed, and the price of gold once again changed from a fixed price to a floating price. From 1973 to 1980, gold soared from $35 to $850, doubling 24 times. Gold did not really peak until 1980, when interest rates were violently raised during the Volcker era.
2. In the first decade of the 21st century, gold ushered in a new round of bull market
What is behind it is the catalyst for a series of events such as the “911” incident, the rapid development of the US economy, which fell into inflation, the global financial crisis, and the European debt crisis. As the European debt crisis was contained and the US economy gradually recovered, gold fell into a five-year bear market after 2011.
In the 17 years since the financial crisis began, the US average annual federal deficit rate reached 6.3%. Even after excluding the pandemic environment, the average deficit rate was as high as 5.4% in 2020 and 2021, far higher than the average of 1.7% from the 1950s to before the financial crisis. The economic growth model driven by fiscal overdrafts is the core reason why the US dollar continues to depreciate compared to gold. America's technical default on Russia's 300 billion US dollars of foreign reserves after the 2022 Russian-Ukrainian crisis marked a new stage in the decline in the credit and influence of the US dollar, represented by the central bank of China, while reducing its holdings of US debt while hoarding large sums of money.
3. There are no significant signs of a sharp rise in the current round of the gold bull market
If the US initiated deficit monetization in 2008, the price of gold has doubled 5.7 times so far; if the US technical default on Russia's foreign exchange reserves in 2022 is used as a starting point, the price of gold has increased 2.4 times so far. Compared to the 24-fold increase in gold prices in the 70s of the last century, there is no sign of a significant surge in this round of gold bullish growth.
The opposite of gold is dollar credit. In the long run, the upward trend in gold prices is positively correlated with the size of US debt. According to the US Congressional Budget Office (CBO) forecast, by 2035, the ratio of total US federal debt held by the public to US GDP will rise from 97.8% in 2025 to 118.5%, surpassing the high at the end of World War II. Against this background, there is still room for imagination in the gold bull market. Unless in this process, AI technology appears to bring about an overall increase in productivity in various industries at the organizational and structural levels, and lead the US back out of stagflation and improve economic and financial efficiency, then this is a sign that the gold bull market will end.
From a financial perspective, are the central bank and the market nearing completion of the process of purchasing additional gold?
1. Central Bank Money Purchases: Slowing Down, Not Over
Against the backdrop of global political multipolarization, declining geographical influence of the United States, and rising debt alert in developed economies such as the US and Europe, major geographical powers (China, Russia, India, etc.), traditional neutral countries (Singapore, Saudi Arabia, Qatar, etc.), and Russian-Ukrainian frontier countries (Poland, Hungary, etc.) have gradually increased their gold reserves over the past three years. The share of “central bank purchases” in gold investment demand rose from 15% in the first quarter of 2022 to a high of 54% in the fourth quarter of 2024.
Even after three years of significant increases in holdings, central banks around the world still have a low value for gold. According to World Bank data, gold reserves accounted for about 22% of global central bank reserves in 2024, up 7 percentage points from three years ago, but there is still a gap compared to important turning points in the geopolitical landscape in history. This figure was 29% at the end of the Cold War in 1990, and 58% at the end of the Great Stagnation in 1980. If the share of gold reserves held by the central bank returns to the level of 1990, there is still room for a 7% increase, corresponding to the demand for gold purchases of about 3,400 tons.
According to the results of the 2025 World Gold Council survey on central banks' gold reserves, 76% of the central banks surveyed said that the share of gold reserves will continue to “rise moderately higher (moderately higher)” in the next 5 years (46% in 2022, 62% in 2023, 69% in 2024). Gold's performance during the crisis, diversification of portfolios, and the desire to hedge against inflation are the core reasons for increasing their gold holdings.
Guojin Securities believes that under depreciation transactions where the credit of the US dollar has faded, the revaluation of gold, as a scarce monetary asset without sovereign credit endorsement, is difficult to end; the price of gold has “lost its anchor.” In this process, the central bank's demand for gold purchases has not weakened. Although the amount of gold purchased in the short term is not as high as market capital fanaticism, it will become an important gold price chassis force. When there is a technical correction in gold prices, the purchase expectations of the central bank and sovereign funds will limit the room and sustainability of the pullback.
2. Market capital: the need for combination optimization and the need to hedge against AI narratives is still there
For investment institutions, the long-term value of gold lies in its low retracement and low correlation with traditional equity assets, and is an indispensable hedging tool in major asset allocation portfolios.
Although major asset allocation portfolios such as risk parity strategy portfolios and Markowitz-mean variance strategy portfolios already have some exposure to gold, there are still some non-institutional investors and traditional equity strategy portfolios that have not gotten involved in gold, because equity hedging has been effective for quite some time in the past, and bonds are enough to spread the risk of fluctuations in US stocks. In the 40 years before 2022, the world as a whole experienced a dividend era of falling interest rates and cooperation among superpowers. In particular, after 2008, major central banks such as the US, Europe, and Japan maintained extremely loose monetary policies for many years. However, since 2022, factors such as the global pandemic, Western populist politics, interest rates, and the inflationary environment have drastically changed the global financial market.
The continued high inflation environment will greatly reduce the value of government bonds as a tool for diversifying portfolios. Historical experience in the past 50 years shows that when the US core inflation level falls below 2.5%, the correlation between US stocks and US bonds is generally negative (that is, allocating shares and bonds at the same time can effectively spread risk), but when core inflation is above 2.5%, this kind of equity and debt hedging is on the verge of failure. The positive correlation between US equities and bonds this year is still near the high level of nearly 27 years, highlighting the need for alternative assets as diversified allocation tools. Given that gold has historically been less correlated with many traditional asset classes, strategically allocating gold can help improve the risk-to-cost ratio of various investment portfolios in various market cycles. Over the past year, global gold ETF holdings have increased 20%. Strong investment demand may not only be setting expectations for the Fed to cut interest rates, but also a sign that traditional asset portfolio strategies are changing.
As far as transactional capital is concerned, there is still a need to increase gold holdings. On the one hand, the Federal Reserve's interest rate cut cycle is not over yet. Market pricing will still cut interest rates 2-3 times next year. The expected decline in real interest rates may drive market capital purchases represented by gold ETFs. On the other hand, the dumbbell strategy of “making more AI+more gold” is a two-sided bet on the next phase of the US national transportation. When the AI bubble reaches the latter half, the “hedging” properties of gold are expected to increase.
Gold: A Pricing Perspective on Current Monetary Credit vs. a Comparative Perspective on US Financial Assets
Under the monetary credit system, if global dollar currency/global gold central bank reserves are used as a representative of global dollar gold, then the dollar credit implied by the current gold price of about 4,000 US dollars per ounce is lower than when the Bretton Woods system collapsed in 1971. However, if you look at it from a different perspective, compared to US financial assets, the current market capitalization of gold/the market value of US stocks and bonds just happened to be at a historically low level around 1971.
Risk warning: Data availability is limited, and disclosure of data is lagging; the pace of AI commercialization is accelerating to recharge US dollar credit; understanding of the restructuring of the international order is biased.