Recent tensions between the US and Iran caused a temporary setback in gold prices, but over a longer horizon, the precious metal's appeal remains strong.
At a recent "2026 Market Outlook Forum" hosted by the London Stock Exchange Group (LSEG), economist Hong Hao stated that the recent decline in gold prices is not due to deteriorating fundamentals, but rather because gold has "fulfilled its phased historical role."
On April 17, COMEX gold futures closed up 0.85% at $4,849.4 per ounce, still significantly below the all-time high of $5,666.4 reached in January of this year. Spot gold also rose 1.05%, surpassing $4,800 per ounce, but remained distant from its January peak of $5,598.75.
Hong Hao analyzed that during times of war, central banks in some countries are forced to sell US dollars and gold to obtain liquidity and protect their exchange rates due to domestic currency pressures. For instance, the Central Bank of Turkey may not wish to reduce its gold holdings but is compelled to sell, likened to selling off family silverware.
When confidence in fiat currency faces a crisis, Hong Hao believes only gold can provide a solution. This is not only a historical lesson but also reflected in the current actions of central banks worldwide. Although some nations must sell gold to address short-term liquidity crises, this very action underscores gold's irreplaceable role as the ultimate means of payment and anchor of credit.
There is no doubt that the price of gold will double.
The return cycle of gold is ultimately tied to the credit cycle, which is the cycle of liquidity changes. Liquidity conditions peaked from the end of last year to the first quarter of this year before beginning to recede. Hong Hao emphasized that this shift directly led to gold's reversal from its historical highs.
Significant market volatility will also bring substantial investment opportunities. For gold, although short-term volatility is intense due to marginal liquidity contraction, Hong Hao asserts that its long-term allocation value persists, and investors should not be overly anxious about having bought at high levels.
Hong Hao's analysis indicates that lower US Treasury credit and higher yields correlate with higher gold prices one year later. Holding a 10-year US Treasury for a year could result in a loss of nearly 10 percentage points, making it a highly unfavorable trade. In contrast, fundamental logic, narrative logic, and data models all point towards higher gold prices, with a future doubling being virtually certain. Despite recent substantial price corrections, he remains bullish on gold's long-term prospects.
From a broader historical perspective, the performance of gold and silver has been validated over time. Hong Hao noted that gold and silver are among the few precious metals in human history that have entered the monetary credit system. China once used silver as circulating currency, and gold has served as money for thousands of years. To this day, central banks continue to issue fiat currency based on precious metals. Gold has effectively replaced US Treasuries for many central banks, which are opting to buy gold instead.
Concurrent rallies in gold and equities signal systemic risk alarms.
Historically, gold has exhibited zero or negative correlation with stocks, making it an effective safe-haven asset. Including gold in a portfolio naturally creates a hedging effect against risk.
However, Hong Hao cautions that since the outbreak of the Russia-Ukraine conflict, the trajectories of gold and US stocks have largely moved in lockstep—when US stocks rise, gold rises; when they fall, gold adjusts accordingly. This phenomenon, absent except during World War I, suggests that gold is no longer a statistically effective safe-haven asset and has "failed" in this role, similar to US Treasuries. The absence of a genuine safe-haven asset in portfolios increases systemic risk.
Even without war, marginal tightening of liquidity conditions would severely impact risk asset prices. Hong Hao stated that what we are witnessing is merely a prelude; the surge in the US dollar exchange rate itself is an indicator of globally contracting liquidity, leading to sharp volatility in asset prices, including US stocks. When liquidity contracts, asset prices plummet regardless of other events—this is a fundamental logic.
Regarding the recent strong rebound in US and Asian stock markets, Hong Hao attributes it more to a temporary alleviation of war risks. Although the semiconductor cycle has reached a阶段性 peak, investor equity positions remain very high, with US retail investors frequently buying on dips.
Looking ahead, Hong Hao warns that the peak of the US stock market cycle presents a beautiful yet perilous vista. "We see the most splendid scenery, but it may also mark the beginning of a descent."
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