Zhu Shanying from CITIC Futures: Against the backdrop of loosening US dollar credit, gold remains in a long-term bull market

Recently, the eighth event of the "Lujiazui Financial Salon" concluded successfully in Lujiazui, Pudong, Shanghai. This session focused on the theme of "Investment Strategies in the Gold Market and Enhancing the Pricing Power of RMB-Denominated Gold: Opportunities and Challenges in the Global Landscape." Zhu Shanying, a senior researcher from the Macro Research Team at CITIC Futures Research Institute, shared insights into the evolving pricing logic of the gold market. She pointed out that gold prices have increasingly returned to a broad paradigm of being priced based on their monetary attributes.

Zhu Shanying first shared some interesting changes in the gold pricing framework in the gold market over the past two years. In the decade preceding 2023, global central banks generally entered a phase of liquidity tightening, tightening monetary policy through measures such as balance sheet reduction and interest rate hikes. During this period, the creditworthiness of paper currencies, represented by the US dollar, remained relatively stable, and the allocation logic of gold as a non-interest-bearing asset dominated the market. The market often studied gold prices with reference to the US real interest rate, showing a strong negative correlation. However, after 2023, there have been instances where gold prices have moved in tandem with the US real interest rate and the US dollar index, with gold prices increasingly returning to a broad paradigm of being priced based on their monetary attributes.

Discussing the trading logic of gold since last year, Zhu Shanying noted that after 2024, the upward slope of gold prices has become steeper, and the trading themes for gold have varied at each stage throughout the year. For example, from March to May last year, the core trading theme in the market was secondary inflation. From July to August, trading was more centered around expectations of a US recession. From September to January, trading was focused on expectations for US Fed interest rate cuts. In the first quarter of this year, after Trump took office, market demand for safe-haven assets, including expectations of subsequent US stagflation, became the main trading logic driving the sustained strength of gold prices.

Looking ahead, Zhu Shanying believes that from the perspective of a short-term cycle, amidst the escalating Sino-US tariff disputes, expectations of US stagflation continue to strengthen. If the US Fed does not fully shift to an interest rate hiking cycle, it will be difficult to reverse the stagflationary environment. From a longer-term perspective, whether it is the reality of excessive US national debt issuance, the intensification of the deglobalization trend, or changes in the competitive landscape between China and the US in the technology sector, all constitute the core logic for the long-term contraction of US dollar creditworthiness. Gold remains in a long-term bull market.

During an industry dialogue titled "From Improving Asset Allocation to Enhancing Pricing Power: Prospects for the Development of the Gold Trading Market," Zhu Shanying stated that gold is highly suitable as a long-term investment asset. Assuming one bought and held gold since 1971, when it first moved towards free pricing, the annualized compound return over more than 50 years has been 8%, and the return over the past 20 years has been 9%, which is quite impressive. In the past two years, gold has entered a phase of accelerated appreciation. The US may be heading towards stagflation, trade disputes have become more intense, and the US Fed has adopted a more cautious approach to monetary policy. It cannot be ruled out that the US may transition from its current stagflationary environment to a recession, further highlighting the importance of gold allocation.