Guojin Securities: In the long term, gold is expected to usher in a new bull market

Guotai Junan Securities pointed out that historical experience shows that gold typically performs well in a stagflation environment, but this round of the market initially focused on pricing inflation factors while ignoring the economic “stagnation” pressure. The U.S. economy has already shown signs of weakened growth, and high oil prices may further accelerate the arrival of recession. If economic stagnation resonates with a downturn in the capital market, liquidity expectations may become the trigger for a rebound in gold. In the long run, the consensus in the market is that the comprehensive national power of the United States is shifting from prosperity to decline, and gold is expected to enter a new bull market.

The full text is as follows

Guotai Junan Macro, Song Xue Tao｜Looking at Gold Again After the Tremor: The Macro Shift from Inflation to Stagnation, Long-term Opportunities in the Transition of U.S. National Power

Core Viewpoints

Since March, international gold prices have experienced a rapid adjustment, differing from the adjustment at the end of January caused by high trading congestion and expectations of balance sheet reduction. Before this round of adjustment, the implied volatility of gold had already detached from extreme highs, with core driving factors shifting to macro variables. Initially influenced by the outbreak of the U.S.-Iran war, the significant strength of oil and the dollar triggered a liquidity crisis, and the tightening of offshore dollar liquidity led investors to sell gold for cash; subsequently, high oil prices raised concerns about imported inflation, expectations of interest rate hikes from multiple central banks heated up, and the rising U.S. Treasury yields increased the holding costs of gold. Speculative funds such as hedge funds continued to withdraw, with CFTC speculative long positions in gold continuously declining since December 2025, and gold ETF holdings also cooled as interest rate hike expectations waned.

In the short term, although technical indicators for gold show oversold conditions, with the London gold RSI dropping to an extreme value of 21.1 and the gold-oil ratio retreating to near long-term central levels, the reversal trend has not yet been clearly established. The KDJ has not indicated a golden cross signal, and prices continue to probe along the lower Bollinger Band. At the same time, implied volatility of gold continues to rise, and the market’s uncertainty regarding its price path remains. Overall, major asset classes are in a rising wave trend, emphasizing the importance of cash assets. In terms of support levels, 4300 points, 3900-4000 points, and 3400-3500 points constitute different tiers of key support. In the short term, it is recommended to focus on wait-and-see and appropriate left-side layouts, waiting for volatility to stabilize.

Historical experience shows that gold typically performs well in a stagflation environment, but this round of the market initially focused on pricing inflation factors while ignoring the economic “stagnation” pressure, resulting in a phase of retracement for gold. Currently, the U.S. economy has shown signs of weakened growth, with private durable goods consumption expenditure growth slowing down, the job market facing pressure from rising unemployment rates, and non-farm employment additions approaching zero. High oil prices may further accelerate the arrival of recession. If economic stagnation resonates with a downturn in the capital market, the Federal Reserve may reassess recession risks, and the possibility of restarting easing policies cannot be ruled out. This liquidity expectation difference may become the trigger for a rebound in gold.

In the long term, the prolonged U.S.-Iran war poses multiple shocks to the credit of the dollar. The U.S. has not demonstrated overwhelming military advantages in the war, and NATO member states have had limited responses, with both Eastern hegemony and dollar hegemony facing weakening; Iran’s countermeasures to block the Strait of Hormuz may disrupt the “oil-dollar” chain; meanwhile, the combination of high interest rates and increased military spending due to war exacerbates U.S. fiscal pressure, hindering the debt resolution process and further eroding dollar credit. The clearing of short-term gold speculative bubbles lays the foundation for long-term rises. If the consensus in the market shifts to the U.S. comprehensive national power moving from prosperity to decline, gold is expected to enter a new bull market.

Risk Warnings

1. Geopolitical risks exceed expectations, 2) U.S. fiscal stimulus exceeds expectations, 3) Limited data availability.

(Source: Yicai)