After the oscillation adjustment, is gold entering a "golden dip" for positioning?

Ask AI · How Weakening Dollar Credit Supports Gold’s Long-Term Value?

After the gold market underwent a sharp correction, it has gradually stabilized and moved higher. London spot gold has rebounded from the $4,100 low to above $4,500. The core driver behind this round of adjustment is the combined squeeze from liquidity shocks and delayed rate-cut expectations—not a refutation of gold’s long-term logic.

As market risks are gradually released, signs show that negative shocks are weakening. From a medium- to long-term perspective, the core logic remains solid: weakening of the dollar credit system, the global “de-dollarization” trend, and continued central bank gold purchases. Short-term adjustments may instead provide a window for medium- to long-term allocation. You may consider focusing on the Guotai CSI Gold ETF (518800) and the Guotai CSI Gold Stocks ETF (517400) to capture long-term opportunities in gold.

[Market Signal: Negative Shocks Are Weakening, Gold Allocation Value Is Returning]

Gold and oil rising together marks that the liquidity crisis is entering its final phase. Gold and risk assets have shown divergence in their performance. During the adjustment, long-term funds have been increasing holdings against the trend. Technically, gold has already pulled back to key support levels. Negative shocks are showing signs of weakening.

Signal One: Gold and Oil Rising Together, Liquidity Crisis Entering the Final Phase: Since the outbreak of the U.S.-Iran conflict, last week saw, for the first time, both gold and the U.S. dollar index rising together, and both gold and oil prices rising together. According to analysis by CITIC Futures, the concentrated downside impact was formed by the selloff driven by the worsening risk appetite over the past two weeks, as well as partial reductions in holdings by some central banks and ETFs. But now gold prices are gradually showing signs of desensitization relative to equities and bonds. Gold and oil rising together indicates that the liquidity crisis is nearing its end. After leverage is gradually unwound, gold’s safe-haven attribute is expected to recover. Huafu Securities also noted that the geopolitical situation is difficult to call “improving,” and that safe-haven and stagflation trades remain the core of gold trading.

Signal Two: Long-Term Funds Increase Holdings Against the Trend: According to the traders’ position reports disclosed by the U.S. Commodity Futures Trading Commission, during the reporting week from March 17 to March 24, open interest in gold futures contracts decreased slightly, but on the long side, the main incremental increase came from the “other reportable” trader group—which mainly includes large investment funds such as pension funds and endowment funds. They added 15,500 long contracts. This group’s increase in holdings against the trend reflects its positive outlook on gold in the long term, providing solid long-term buy-side support for gold prices.

[Macro Logic: Rate-Cut Expectations at an All-Time Low, Weakened Dollar Credit Provides Long-Term Support]

Fed Watch shows that throughout the year, expectations still remain for no rate cuts. Rate-cut expectations have reached an all-time low, so gold is unlikely to face further drag in the short term. In the medium term, as “inflation” transmits to “stagnation,” a stagflation scenario will continue to be supportive for gold.

Rate-Cut Expectations Have Been Fully Priced: According to the CME FedWatch tool, as of March 29, market expectations for rate cuts during 2026 have dropped to an all-time low, and the timing of rate cuts in 2027 has been pushed to December. CITIC Futures analysis indicates that rate-cut expectations are already at an all-time low, leaving little further drag on gold prices in the short term. In the short run, with the Middle East situation layered on top of fluctuating Fed rate-cut expectations, the overall picture is one where things are more likely to rise than fall.

Data source: CME, CITIC Futures Research Institute

Weakening the Dollar Credit System Is a Long-Term Narrative: According to analysis by CITIC Futures, the global petrodollar credit system formed during the last Kondratieff cycle is in the process of gradually breaking down. Analogous to the 1970s–1980s, the Middle East war caused oil supply disruptions, which triggered a stagflation crisis; energy and gold prices stayed at high levels for a long time, volatility in risk assets increased, and the dollar weakened. For now, the market seems to be moving in a similar direction as well, and the logic of a long-term weakening dollar benefits the reshaping of A-share valuation from the perspective of funding and flows. CITIC Futures also pointed out that if the United States falls into the quagmire of a prolonged war, it may further intensify debt pressure and accelerate the de-dollarization process in emerging markets; the direction of declining dollar credit may be reinforced again, and the core logic of gold’s long-term bull market will continue.

Central Bank Gold Purchases Provide Solid Buying Demand: According to Huafu Securities analysis, against the backdrop of global tariff policies and geopolitical uncertainty, safe-haven and stagflation trades remain the core of gold trading, and the value for long-term allocations does not change. Central bank gold purchases remain the key force of buying demand supporting global gold prices. Although the Turkish central bank recently used part of its gold reserves due to domestic economic pressure, this is a short-term move rather than a trend shift. In the long run, the global “de-dollarization” trend is still accelerating.

[Short-Term Pressure: Marginal Changes, Not a Reversal of the Trend]

The core driver behind this round of gold correction is the combined squeeze from liquidity shocks and delayed rate-cut expectations—not a refutation of gold’s long-term logic. Currently, negative shocks are showing signs of weakening.

Liquidity Shocks Are Being Gradually Absorbed: According to Guotai Haitong Securities analysis, gold’s earlier rally was driven by speculative funds, so it is vulnerable to liquidity shocks—when geopolitical conflicts heat up and risk appetite declines, funds can withdraw. But CITIC Futures pointed out that the selloff brought about by the worsening risk appetite over the past two weeks, along with partial reductions in holdings by some central banks and ETFs, has already formed a concentrated negative shock. Currently, gold prices are gradually showing signs of desensitization relative to equities and bonds. After leverage is gradually unwound, gold’s safe-haven attribute is expected to recover.

The Fed May Not Necessarily Hike: Although the yield on the 2-year U.S. Treasury is currently higher than the federal funds rate and is viewed by some market participants as a signal that the Fed will raise rates, similar situations also occurred during the 2007 to 2008 interest-rate cycle, and in the end the interest rate was kept unchanged. Guotai Junan Futures stated that at the March FOMC meeting, the Fed raised its PCE inflation expectations, but recent remarks from officials have also continued to be relatively hawkish. Pricing for rate cuts during the year has further narrowed, while expectations for rate hikes have slightly contracted over the week, reflecting the market’s wait-and-see stance.

Geopolitical Situation Still Sees Ups and Downs: According to Huafu Securities analysis, with the Middle East situation overlapping with fluctuating Fed rate-cut expectations, the overall picture still shows an “easy to rise but hard to fall” pattern. Although there are signals that short-term conflicts have eased, the Strait of Hormuz blockade situation remains severe. Market sentiment has not truly calmed, and energy prices remain elevated, suppressing the rebound space for precious metals. The geopolitical situation is difficult to say has improved; safe-haven trading remains the core of gold trading.

[Guotai CSI Gold ETF (518800) and Guotai CSI Gold Stocks ETF (517400) Capture Gold’s Long-Term Opportunities]

In the short term, gold may enter a period of range-bound correction and recovery. In the medium to long term, as the transmission from “inflation” to “stagnation” unfolds, a stagflation scenario will continue to be bullish for gold. And if the United States falls into the quagmire of a prolonged war, it may further intensify debt pressure and accelerate the de-dollarization process in emerging markets, so the core logic of gold’s long-term bull market will remain intact.

As a core tool for hedging “currency depreciation” and dollar credit risk, gold’s long-term allocation value has not been weakened by short-term adjustments. Judging from historical experience, during gold bull markets, deep pullbacks often become windows for medium- to long-term allocations.

For gold investment, the Guotai CSI Gold ETF (518800) is backed by physical gold, with gold reserves stored in the vault of the Shanghai Gold Exchange. Its NAV performance directly tracks the gold price.

There are many ways for investors to participate in gold investment, including physical gold, jewelry gold bars, gold futures, and gold ETFs. The Guotai CSI Gold ETF (518800) currently has clear investment advantages. The reason is that last November, the state introduced new gold tax policies. The core provision of the new policy states that when physical gold is extracted through an exchange, value-added tax must be paid. But through the Guotai CSI Gold ETF (518800) for non-physical investment, the corresponding gold assets are also stored in the exchange vault and do not require actual extraction, so value-added tax can be exempted.

The Guotai CSI Gold Stocks ETF (517400), as a tools-based product designed to position along the gold industry chain, combines both gold-price sensitivity and liquidity advantages in the stock market. It is suitable for investors who want phased allocation or medium- to long-term positioning by participating in gold-related opportunities through the equity market.

For investors, between short-term volatility and long-term certainty, the allocation window for the gold sector is opening. By building positions through the Guotai CSI Gold ETF (518800) and the Guotai CSI Gold Stocks ETF (517400), you can not only capture trading opportunities catalyzed by short-term geopolitical conflict, but also use them as core products for long-term allocation to the gold industry chain.

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