Daniel Zhang: Gold still has a ten-year pulse period, and when the real volatility arrives, the price increase of gold may far exceed expectations

Macroeconomics has become the most important topic in investment in recent years; gold is a key asset that cannot be overlooked in investment.

On June 10, Zhang Yu, Deputy Director of the Research Institute at Huachuang Securities and Chief Macro Analyst, gave a presentation on "Decoding the Implicit Pricing of Gold," focusing on the current macroeconomic situation, the global economic landscape, and the prospects for gold investment.

Zhang Yu believes that, given the current gold price, she still maintains the view first reported in December 2023 that the gold market is a 10-year strategic (market), and she continues to be bullish on gold, emphasizing its allocation value.

Zhang Yu also believes that discussing the "grand narrative" of gold is not very meaningful at this time; the key is to build a quantitative model to measure gold's performance, track its trends, and make more targeted assessments of gold's future potential.

Zhang Yu also reminded, not to underestimate the "fat tail effect" of gold (the likelihood of small probability events occurring). She stated that when "real turmoil" arrives, the increase in gold prices may far exceed expectations. Therefore, one should maintain a strategic reverence for gold.

Key Quotes:

1. In the past two periods of restructuring the century's order, there were intense gold pulses lasting about 10 years. During those times, gold prices increased by more than 3 to 5 times.

2. The realization of gold's returns is pulse-like, and gold has likely entered a pulse period now.

3. The current gold price, after stripping away traditional factors, has reached a peak level of "unexplainable parts" comparable to the 1970s and 1980s, similar to when the Bretton Woods system collapsed and gold decoupled from the dollar.

4. The decoupling of gold from the dollar in the 1970s and 1980s led to the formation of a new cycle of global financial derivatives and petrodollars. The current "Order Reconstruction Index" approaching a high point may indicate a drastically different outcome for gold.

5. For the current order's dominant players, gold may serve as a "retro-style hedge"; for challengers of the order, it may be a strategic reserve; for other passive participants within the order, it is a broad bet on chips.

6. In the future, physical gold is likely to have a premium over paper gold, and as the order is reconstructed, various countries may impose more restrictions on different investment assets.

7. If one believes that today's world is undergoing a comprehensive order reconstruction, gold is currently breaking through a 50-year pressure level, potentially moving towards a new "unmanned zone" with new elasticity and large pulse space.

(The following is a transcript of the speech, presented in the third person, with some content omitted.)

"Grand Narratives" Have Little Meaning

Zhang Yu stated that the trend of gold in recent years can be described as "doubt," "doubt being falsified," "exceeding expectations," "being doubted again," "being falsified again," and "exceeding expectations again." (Investor perspectives) have gone through many repetitions but have all been falsified one by one.

At this point in time, the "particularly hollow grand narrative" about gold is basically well-known, and discussing it in general terms has little significance.

To predict the future trend of gold, one must use real, quantifiable tools and a new indicator system to capture and explain trading

Ten-Year Strategy Bullish on Gold

Zhang Yu subsequently reviewed the team's four in-depth reports on gold since 2023.

The first report was published in December 2023, titled "Gold: A Century, A Decade, This Year." The conclusion at that time was: during a once-in-a-century global order restructuring period, coupled with the end of the short-term dollar trend, the strategic outlook for gold is bullish for the next ten years. The gold market will start to rally next year (2024).

The second report was published in May 2024, named "The 'Unusual' Pricing of Gold." By then, gold had already risen by 20% since December 2023. At that time, there was a general understanding in the market that gold was decoupling from the dollar index, but it was unclear how this decoupling was happening. This report referenced monthly, quarterly, and annual data from the World Gold Council and set up three quantitative models to demonstrate that in the past two years, the explanatory power of traditional factors on gold prices has systematically declined, and there are 'non-traditional, invisible forces' behind gold prices.

The third report was released in March 2025, titled "Gold Rhapsody," which simulated gold price performance under five extreme scenarios. By this time, the gold price had surpassed $3,000 per ounce, and theories about gold prices peaking were emerging. Zhang Yu's team wrote this report to challenge the market's limited understanding of gold, proposing to abandon the inertia of traditional thinking; under true turmoil, the upside potential for gold will be unimaginably large.

In May 2025, the team launched the fourth report "Gold Implied 'Order Restructuring' Index," which pointed out that the current gold price, after stripping away traditional factors, has reached a peak level not seen since the 1970s and 1980s. This coincided with the collapse of the Bretton Woods system, the decoupling of gold from the dollar, and the formation of a new cycle of global financial derivatives and petrodollars, marking a significant order restructuring. Whether this index surpasses that previous peak may indicate a vastly different outcome.

Four Core Issues of Gold

Zhang Yu summarized several core characteristics of gold prices:

• Non-yielding asset;
• Supply scarcity;
• Human consensus on hard currency;
• Long-term returns on par with U.S. stocks;
• Poor short-term holding experience, with a noticeably longer duration of low returns;
• If it doesn't rise, it stays flat; if it does rise, it can multiply three to five times;
• Very good hedging effect against other major asset classes, with a relatively low correlation coefficient.

When it comes to gold investment, there are four core questions:

Why now? Why gold? How much more can it rise? What kind of gold to invest in?

Gold Investment Has Entered the Pulse Phase

Regarding the first question, "Why now?"

Zhang Yu's conclusion is that the realization of gold's returns is pulse-like, and gold has likely entered a pulse phase now.

As the world enters a once-in-a-century order restructuring period, all assets related to specific national credit, such as stocks, bonds, and fiat currencies, face uncertainty about whether they will exhibit order premiums or order discounts Financial trade is highly dependent on the stability of credit contract orders, so throughout the entire neoliberal era, which spans the past 40 years, small government, financial liberalization, capital without borders, and the stability of the dollar circulation order have greatly developed modern finance and trade.

Currently, with the backlash against neoliberalism, the rise of conservatism, and the rise of populism, modern finance and trade are beginning to exhibit characteristics of nationalism, conservatism, and fragility.

For the current order's dominant players, gold may represent a "retro-style safe haven"; for the challengers of the current order, it may serve as a strategic reserve; for other passive participants within the order, it is a broad bet on chips.

Stunning Gains During the Order Reconstruction Period

Regarding the second question, "Why gold?"

Zhang Yu believes that during the last two centuries of order reconstruction, whether around 1800 or 1930, there were intense gold pulses lasting about 10 years. At that time, gold's increase over a decade was more than 3 to 5 times.

Once the order becomes clear, gold becomes worthless. The new order and new dominance will stand on the shoulders of gold and move to the core of the historical stage.

Two Possible Scenarios

How much more can gold rise?

Zhang Yu stated that without considering the historical reference of gold pulses increasing by 3 to 5 times, from a quantitative perspective, the current "Order Reconstruction Index" (which strips away traditional factors) has nearly reached the peak value of the Bretton Woods system (at the time of its collapse).

Based on this conclusion, Zhang Yu provided two possible reference scenarios:

The first scenario is if you believe that the global order reconstruction over the next 10 years or longer is a three-dimensional reconstruction combining political, military, economic, and legal currency wealth systems. In this case, gold still has room to rise, and its increase will surpass historical monetary order reconstructions. Subsequently, after the "Order Reconstruction Index" breaks through the 50-year high pressure level, there will be an unpredictable pulse.

The second scenario is if you believe that the future global order (military, technology, economy, etc.) remains stable, with only the weakening of the dollar system, currency reconstruction, and correction issues. In this case, considering that gold pricing is already close to the peak value at the collapse of the Bretton Woods system, it seems that the increase may come to a halt.

Therefore, whether it is scenario one or scenario two inevitably involves subjective judgment on the overall trend. Zhang Yu stated that she subjectively believes it is the first scenario, which is a comprehensive order reconstruction, not just a monetary system reconstruction issue.

Long-Term Bullish on Physical Gold

Regarding what kind of gold to invest in?

Zhang Yu indicated that she remains long-term bullish on physical gold, as physical gold is likely to have a premium over paper gold in the long-term future. Since the beginning of 2025, the rush for physical gold in the UK and the US has caused unusual movements in gold, which has sounded a small alarm.

In the future, physical gold is likely to have a premium over paper gold, and as the order is reconstructed, various countries may impose more restrictions on various investment assets In the short term, paper gold can better leverage its flexible buying and selling characteristics, which can reduce the volatility of asset portfolios, as it has a relatively low correlation with other assets. It is one of the few assets that can hedge against all major global asset classes.

Therefore, it depends on demand and the chosen phase. In the medium term, she proposed a bullish outlook on physical gold over the next ten years.

Supply Side Cannot Significantly Increase Production

Zhang Yu also summarized some asset characteristics of gold:

First, the long-term return of gold can rival that of the S&P 500. Since 1920, the annualized returns of gold and the S&P 500 have been 5.37% and 5.83%, respectively, which are very close.

Second, gold has a relatively low correlation with major equity and bond assets, which can improve the performance of asset portfolios. Introducing gold into a traditional stock-bond portfolio can enhance the efficient frontier of the stock-bond portfolio.

Third, the supply side of gold is relatively stable. In 2024, gold mine production has reached a historical high of 3,661 tons, along with some increases in gold mining and recycled gold supply, resulting in a total supply growth of 1% year-on-year. However, in 2024, total gold demand is expected to grow by 25% year-on-year.

Fourth, the average daily trading volume in the gold market is comparable to that of the U.S. short-term bond market. The gold market is very large and has global liquidity.

Fifth, there are seven main investment methods for gold in the domestic market, which can be divided into four quadrants based on risk tolerance and willingness to take risks, such as gold options, gold futures, gold T+D, gold stocks, paper gold, gold ETFs/QDII, and physical gold.

Combining her views on long-term gold, current investment restrictions, and considering that the reconstruction of the global order is dynamic, she reiterated that in the future, paper gold is likely to have a discount risk relative to physical gold, or physical gold may have a premium.

Asset Elasticity is High

Zhang Yu also listed several extreme scenarios for gold's potential performance. She emphasized that the gold prices given in these scenarios do not represent target prices, but they reflect that the elasticity of gold assets is very high.

Moreover, the price increase of gold exhibits a strong fat-tail effect (undervaluation), and participants in the capital market need to actively respond to this undervaluation.

The first scenario is that emerging markets increase their gold reserves. Among the major reserve currencies in the world, the average proportion of gold in emerging markets is only about 9%, far below the average level of about 26% in developed markets. If emerging markets raise the proportion of gold in their foreign exchange reserves to a level similar to that of developed countries, it would mean that the adjustment of foreign exchange reserves in developing countries would consume 4 to 5 years of gold production.

If this process gradually occurs over the next 10 years, the annual incremental demand for gold would be 40%; even if spread over 30 years, there would still be a growth demand of 15-16% each year. For a commodity, having more than 10 percentage points of growth demand every year for 30 years is quite remarkable.

Based on this assumption, from a supply-demand balance perspective, gold prices could reach $20,000 to $30,000 per ounce in 10 years. Even if calculated over 30 years, gold should be priced at $7,000 to $8,000 per ounce in 10 years. **

The second situation is the collapse of cryptocurrencies. She emphasized that this does not represent her view on the matter, but now new energy and quantum computing are developing rapidly, posing a logical risk that could undermine the foundation of cryptocurrencies. Even if it does not collapse, cryptocurrencies themselves are highly volatile. Looking at the history of Bitcoin, during the crash in 2017, a small amount of safe-haven funds did flow into gold assets, leading to a breakthrough in gold prices.

Therefore, she believes that the dynamic correlation coefficient between gold and Bitcoin is often negative. Recently, some people feel that gold and Bitcoin are rising together, but she does not agree with this; Bitcoin and gold are still different.

The third situation is the change of reserve currency. In this case, they calculated using a price model that in 10 years, the price of gold could reach nearly $90,000 per ounce, which is an extreme scenario.

The fourth situation is the escalation of geopolitical conflicts. Gold is a "player" in hot wars, and credit currencies will lose effectiveness to some extent. Assuming that all newly monetized debts are ultimately repaid in gold, each ounce of gold would need to support $14,000 of debt. This is also a perspective.

The fifth situation is the restoration of the gold standard. Of course, the probability of this situation is almost nonexistent.

She further stated that for any asset, if a supply-demand gap forms at the margin, it is clear how elastic the price can be. In the past two years, everyone speculated on copper, which was just a matter of a few tens of thousands, 100,000, or 200,000 tons on the large supply-demand balance sheet.

Moving Towards a New "No Man's Land"?

In May, Zhang Yu's team created a GIORI index, which is the implied "order reconstruction" index for gold.

This is based on traditional macro variables since 1974 (to fit), deducting all the increases that traditional factors of gold can explain, and extracting the unexplained part, similar to the residuals estimated by the model, to create an index.

The index shows that the invisible, real forces of gold's order reconstruction currently have a peak value that is just about equal to the peaks of the 1970s and 1980s, slightly exceeding them.

If one believes that the current gold is merely trading within a restructured monetary system, it may seem that the increase has plateaued; if one believes that today's world is undergoing a comprehensive order reconstruction, gold is currently breaking through a 50-year pressure level, potentially moving towards a new "no man's land," with new elasticity and large impulse space.

Ultimately, Zhang Yu reiterated her viewpoint, maintaining the perspective she first wrote in her report in December 2023, that (gold) is a strategic asset for the next 10 years, advocating for a bullish strategy on gold and emphasizing its allocation value.

Currently, gold is in a once-in-a-century global order reconstruction period, situated within this very rare decade of price impulse. Therefore, it is essential to maintain a strategic reverence for gold, especially after utilizing tools and indices to open up imaginative space, which further clarifies the characteristics of the asset.

Risk Warning and Disclaimer

The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances Invest based on this, and you bear the responsibility