In April 2026, as global capital markets are impacted by tensions in the Strait of Hormuz, gold prices fall sharply by over 15% from their peak of $5,600, and the A-share market fluctuates repeatedly around the 3,800-point mark.
In a recent dialogue, Hong Hao, Chief Investment Officer of Lianhua Asset Management, shared a series of thought-provoking market predictions.
When asked about the next phase for A-shares, Hong Hao responded succinctly: "Dip first, then rise." Pressed further on whether the market would fall below 3,800 points, he stated plainly: "Most likely, before rebounding."
Regarding gold, his outlook was even bolder: "I believe it could double again without any issue." However, he quickly added: "But whether that happens this year remains uncertain."
These two predictions may appear contradictory, but they stem from the same underlying logic: at this 35-year cyclical peak, the anchor for asset pricing is shifting from the U.S. dollar to gold, while Chinese assets are just beginning their independent trajectory amid global turbulence.
Hong Hao noted that gold could double again, but clarified that this does not mean investors should rush in immediately. At $5,000 per ounce, he recommended "accumulating gold, not speculating on it." By $5,600, he warned of "leverage-induced blowouts."
The key to understanding gold lies not in predicting its price, but in recognizing its role within an investment portfolio.
I. Gold: Returning from "Safe Haven" to "Anchor of Credit" 1.1 Mean Reversion Beyond 5-6 Standard Deviations
When gold fell from $5,600 to around $4,100, market panic ensued. Yet Hong Hao remained exceptionally calm: "Despite the decline, its annualized returns remain at historical highs, roughly 5 to 6 standard deviations above the mean."
This highlights the uniqueness of gold's recent rally. What does 5-6 standard deviations signify? It indicates a move far beyond normal statistical fluctuations.
However, Hong Hao emphasized that mean reversion is a statistical inevitability: "It has no choice but to revert to the mean."
He asserted firmly: "At this point, some may wonder if the gold story is over. Absolutely not. Gold's story has been told for 5,000 years, and it will continue for another 5,000."
This extends the framework he introduced in a January 2026 interview, where he proposed gold as the new valuation anchor, stating: "Under the new credit system, gold may become the anchor for all asset valuations."
The core of this view is that as concerns about the U.S. dollar's credit system grow, market psychology is reverting to a "gold standard" logic.
1.2 The Specifics of This Correction
Why would gold fall just when it is most needed as a safe haven? Hong Hao's analysis was incisive.
The first reason is leverage unwinding. "During the rally, leverage accelerated the price surge." When prices reached parabolic peaks, leveraged funds triggered a collective sell-off, leading to a sharp correction.
The second reason is peak public attention. "Rising prices attracted more mainstream funds, similar to stock speculation. When everyone rushes in, it's usually the peak."
The third and most critical reason is a temporary contraction in U.S. dollar liquidity. Hong Hao pointed out that after the outbreak of war, the dollar's exchange rate surged, indicating demand far exceeding supply.
For emerging markets with significant dollar-denominated debt, investors sold local currencies to buy dollars and exit, forcing central banks to sell gold to buy dollars and protect their exchange rates.
"When the public sees central banks selling gold instead of accumulating it, they follow suit," Hong Hao described, outlining the complete "domino effect."
Yet this logic reinforces his long-term view: "Gold's role as the natural counter to the dollar will not disappear." Once volatility subsides, gold will resume this function.
The paradox of gold is that when everyone is talking about it, it ceases to be a safe-haven asset. Leverage, overcrowding, and central bank sales obscure gold's fundamental role: as a hedge against dollar credit. Once liquidity fears pass, this logic will reassert itself in pricing.
1.3 Validation from Foreign Investment Banks
Hong Hao's views resonate with analyses from several foreign investment banks.
In a March 31, 2026 report, Goldman Sachs maintained a bullish outlook on gold, forecasting a year-end price of $5,400 per ounce, supported by continued central bank purchases and expectations of two U.S. rate cuts. They also noted significant upside risks if private sector allocations accelerate.
UBS Global Wealth Management was even more optimistic, projecting gold prices to climb toward $5,900-$6,200 in 2026, citing U.S. fiscal risks, geopolitical tensions, and structural shifts in the global monetary system. "De-dollarization" and central bank diversification were highlighted as long-term structural supports.
These institutional forecasts align fully with Hong Hao's long-term view that gold "could double again."
II. A-Shares: Dip First, Then Rise; 3,800 Points as a "Crouching" Level 2.1 The Three Layers of "Dip First, Then Rise"
When asked about the next phase for A-shares, Hong Hao's response was concise and forceful: "Dip first, then rise."
Pressed on whether the market would fall below 3,800 points, he said: "Most likely, before rebounding."
This outlook is based on his macro-cycle framework. Hong Hao positions 2026 as the "peak of a 35-year long cycle," with significant volatility due to "geopolitical, cyclical, and liquidity factors converging, presenting both risks and opportunities." Within this framework, any market correction is not an endpoint but a consolidation phase for a larger rally.
The first factor supporting the "dip" is that geopolitical uncertainties are not fully priced in. Hong Hao noted in early March that markets had not adequately incorporated risk premiums for geopolitical uncertainty, which would only stabilize once a turning point in the Iran conflict emerges.
The second factor is the peak transmission of the U.S. AI cycle. His quantitative models indicate that the 3-4 year short cycle in U.S. semiconductors is nearing its peak, which will pressure global tech stock valuations.
The third factor is a phased liquidity contraction. His global liquidity indicator shows liquidity has reached a regional high and is poised to decline, creating short-term pressure on risk assets.
However, the logic supporting the "rise" is equally solid. A-shares are in a relatively better position due to RMB appreciation and policy support. Domestic policy easing, National People's Congress expectations, and stabilizing PPI provide a cushion, with the market already in a bottoming zone and limited downside.
2.2 3,700-3,800: The Consensus Bottom Among Institutions
Hong Hao's view that the market will "most likely fall below 3,800 points" aligns closely with consensus among domestic institutional investors.
A survey released on April 2, 2026, involving over 260 fund managers from more than 140 core investment institutions, showed widespread agreement that the Shanghai Composite's bottoming zone is between 3,700 and 3,800 points.
However, the survey revealed a key detail: actual willingness to increase positions remains weak. Average equity allocations stood at 76.9% for relative return funds (public offerings) and only 53.1% for absolute return funds (private placements). This indicates that while institutions are not pessimistic, they are hesitant to act, waiting for clearer signals.
Most institutions expect annual returns of 5%-10%, with a "neutral" outlook on domestic economic growth. This suggests that markets view geopolitical conflicts and oil price spikes as short-term shocks rather than systemic threats.
Institutions see 3,700-3,800 as the bottom but are reluctant to add positions. This is not a contradiction but a classic characteristic of market bottoms—everyone knows it's the bottoming zone, but no one wants to be the first to jump in. This is the most challenging part of Hong Hao's "dip first, then rise" scenario: knowing a rally is coming, but enduring the pain of the current decline.
2.3 Consistent Optimism from Foreign Investment Banks
Foreign investment banks' views on A-shares align closely with Hong Hao's framework.
Goldman Sachs' Chief China Equity Strategist, Liu Jinqui, reiterated on March 31, 2026, a strategy of overweighting A-shares and H-shares, forecasting 10% profit growth driven by AI, overseas expansion, and "anti-involution" policies.
Morgan Stanley defined 2026 as a "stabilization year," with limited index upside but valuations stabilizing at higher levels. They slightly raised their target for the CSI 300 Index to 4,840 points by December 2026.
Earlier Goldman Sachs projections indicated that A-share corporate profit growth would jump from 4% in 2025 to 14% in 2026 and 2027, driven primarily by AI, overseas expansion, and anti-involution policies.
These foreign institutions' outlooks are fully consistent with Hong Hao's "dip first, then rise" rhythm—short-term pressure, but medium- to long-term optimism.
III. Allocation Framework: "Hold and Prosper," Seeking Certainty Amid Volatility 3.1 Shifting from Offense to Defense
Hong Hao summarizes the 2026 investment theme in four words: "Hold and prosper." At the peak of a 35-year cycle, it's time to take profits and shift from offense to defense.
Specifically, he recommends reducing exposure to growth sectors (like AI and semiconductors) in favor of defensive value sectors (such as banks, high-dividend stocks, and utilities); allocating to gold and government bonds to hedge against volatility and geopolitical risks; and maintaining exposure to industrial metals (like copper and aluminum) with upside potential, while considering early positions in agricultural commodities.
The core of this framework is to avoid gambling at the cycle's peak and instead build a portfolio capable of weathering volatility.
3.2 Commodity Rotation and Gold's Long-Term Value
Hong Hao notes that commodity cycles typically follow a sequence: precious metals first, then base metals, followed by energy. As long as gold prices remain stable within a reasonable range without sharp corrections, related commodities still have clear catch-up potential.
Regarding gold's long-term allocation value, Hong Hao remains consistent. He views gold as a portfolio anchor, suggesting a 5%-10% allocation for hedging purposes. This is not about "trading gold" but "accumulating gold"—the right approach for navigating cycles.
3.3 Divergence Between A-Shares and H-Shares
In terms of market selection, Hong Hao favors A-shares over H-shares. He believes the downward trend in Hong Kong stocks is not over, advising against participating in rebounds until clear bottoming signals emerge. A-shares benefit from RMB appreciation and policy support, putting them in a relatively stronger position.
This aligns with domestic institutional surveys, where 74% of respondents believe H-shares will underperform A-shares this year, and 70% are not considering increasing allocations to Hong Kong stocks.
Positioning for the "Rise" During the "Dip"
In April 2026, as gold hovers around $4,100 and A-shares fluctuate near 3,800 points, Hong Hao's outlook provides investors with a clear framework.
The gold story is not over. Despite a 15% correction, Hong Hao believes it "could double again." This is not short-term optimism but a conviction based on the U.S. dollar's credit system, global de-dollarization trends, and gold's role as a "5,000-year credit anchor."
The A-share correction is not the end. At the 35-year cycle peak, "dip first, then rise" is the most likely path. Foreign institutions are unanimously optimistic about Chinese assets' medium- to long-term value, domestic institutions confirm the 3,700-3,800 bottom consensus, and the "dip" phase is precisely the buildup to the "rise."
As Hong Hao stated: "Volatility creates opportunities. Without changing traditional thinking, investment habits, and updating one's understanding of the world, it is difficult to identify real opportunities."
"Accumulating gold, not speculating" is not inaction—it is knowing why you hold an asset. Waiting for the "rise" is not passive suffering—it is maintaining discipline and framework during the "dip" to protect one's position.
When the smoke clears and volatility subsides, those who positioned themselves during the "dip" will ultimately reap the rewards of the "rise."
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