Dollar Dusk, Gold Returns — The Three Main Themes of A-shares Under the New Geopolitical Order

Since 2022, the global capital markets have been undergoing a profound restructuring of their underlying logic.

A report released by China Merchants Securities on February 26 states that the gold and US dollar system is experiencing a historic and substantive decoupling. This is not just normal price fluctuation, but an inevitable result of the dollar, as the core global credit bearer, experiencing a structural fissure in its three pillars (institutional credit, economic productivity, and military deterrence).

As the dollar increasingly becomes a geopolitical weapon used to enforce financial sanctions, rather than a shared liquidity public good, the global credit system is accelerating its reformation. In this context, gold is once again highlighting its ultimate value as a measure that transcends sovereignty, returning as a “shadow anchor” in the global monetary system.

The report indicates that traditional macro analysis frameworks are failing. The “growth-profit-valuation” logic based on DCF models, which assumes perpetual operation and market efficiency, is being challenged by rising geopolitical uncertainties. Investors urgently need to go beyond simple financial linear extrapolation and incorporate variables such as sovereign credit stability, supply chain independence and security, and core technology controllability into asset pricing.

In the near future, asset pricing benchmarks may increasingly tilt toward gold margins. This suggests that commodities priced in dollars (such as through oil-to-gold or copper-to-gold ratios, mean reversion paths) could experience upward pressure on their central values.

Mapping this to the A-share market, it means capital will accelerate convergence toward a new core logic of “safety, resilience, and controllability.” Investors should quickly adjust their strategic allocations, focusing on resource-based hard assets, autonomous core technologies, and industries related to national security. Only by deeply understanding and adapting to this shift from old to new order can one gain an advantage in the upcoming cycle.

The Collapse of Trust: Systemic Breakdown of the US Dollar’s “Three Pillars”

The report states that before 2022, market pricing of gold was strictly locked within the dollar framework: gold prices had a stable negative correlation with real yields on US Treasuries and a positive correlation with the total US dollar credit supply. However, from 2022 to 2024, amid aggressive Federal Reserve rate hikes, gold prices broke through key resistance levels against the trend, tearing apart this decades-old traditional pricing model.

Analysis suggests that behind this historic decoupling is the simultaneous structural collapse of the “three pillars” supporting the sovereign credit currency system.

First is the foundational contract of institutional credit. After the Russia-Ukraine conflict in 2022, Western sanctions froze about $300 billion of Russian foreign exchange reserves, breaking the international norm that “sovereign assets are inviolable.” The dollar has thus transformed from a shared liquidity public good into a geopolitical weapon that can be weaponized at any time. Coupled with ongoing fiscal discipline breaches in the US, the US national debt interest payments in fiscal 2023 first exceeded $1 trillion, surpassing defense spending, turning sovereign credit dilution from theory into reality.

Second is the hollowing out of economic productivity eroding the monetary foundation. The US manufacturing value-added as a share of GDP has fallen from nearly 30% in the mid-20th century to about 11% today, while China’s manufacturing share has steadily risen to around 30%. When a country’s currency value increasingly depends on financial asset bubbles and tech platform premiums rather than real goods exchange capacity, its intrinsic credit foundation faces restructuring pressure.

Finally, the ultimate collateral—military power—is relatively weakened. The effectiveness of US conventional military superiority has diminished, directly undermining the “safety premium” of the dollar system. As these three pillars simultaneously fracture, global capital will inevitably seek a new, non-sovereign measure of value, with gold’s return serving as a mirror of this historical process.

Central Bank Surge and the Return of the “Shadow Anchor”: Reassessing Everything with Gold

The report states that when the credit backing of a single sovereign currency is fundamentally questioned, global capital will seek refuge in physical assets with no counterparty risk. The monetary attribute of gold has never truly disappeared; it has only been waiting for the moment when sovereign credit expansion reaches its limit for a historic reemergence.

Signs of this reemergence are now clear: from 2022 to 2024, global central banks’ net annual gold purchases have exceeded 1,000 tons for three consecutive years, far surpassing the previous decade’s average of 473 tons per year; by 2025, the total market value of official gold reserves worldwide will surpass the total foreign official holdings of US Treasuries for the first time. This marks gold’s redefinition by global policymakers as a “non-sovereign, anti-sanction” strategic reserve, completing its transition from an asset allocation to a credit backing role.

More profoundly, as the dollar’s value scale distorts, the revaluation space for commodities measured in gold is revealing astonishing potential. For example, the oil-to-gold ratio, which historically fluctuated between 0.04 and 0.1, is now at a historically low level, approaching the extremes seen during the COVID shock. With potential economic rebounds in key years like 2026, this ratio may revert toward its mean, signaling a significant valuation reset.

Similarly, the copper-to-gold ratio, which has been stable between 3 and 8 since 1980 and mostly between 4 and 6 after 2010, is also near its historical lows. If supply-demand dynamics improve or dollar devaluation triggers a mean reversion of this “x-gold” ratio, strategic commodities like crude oil and copper priced in dollars could experience explosive revaluation and strong upward movement.

Valuation Foundations Breaking: Fundamental Iteration of A-Share Investment Paradigm

The macro credit disconnect is profoundly reshaping the valuation foundation of the A-share market. The report states that against the backdrop of global industrial chain restructuring and accelerated geopolitical segmentation, the traditional “growth-profit-valuation” linear extrapolation analysis framework is no longer sustainable. Future asset pricing must shift toward a new paradigm centered on “safety, resilience, and controllability.”

This paradigm shift will be reflected in the reconstruction of two key parameters in valuation models. First is the discount factor for availability risk: for companies with high supply chain vulnerability, the market will increase their equity costs, assigning more cautious risk premiums in discounted cash flow calculations.

Second is the premium for safety attributes: for companies capable of providing autonomous, controllable key equipment, core materials, or strategic services, the market will assign lower discount rates and more optimistic market share assumptions. This means that in the future A-share valuation system, geopolitical disturbances will no longer be external variables but embedded as endogenous parameters within valuation models.

Navigating the New Order: The Three Core Investment Themes in the New Framework

The report states that in a macro environment where great power competition redefines growth and security priorities, the traditional industry rotation logic in A-shares has lost its reference value. Investors’ allocation frameworks must converge on three interconnected strategic main lines, which are both risk-avoidance choices and asset re-pricing directions.

The first main line is resource and hard currency assets, serving as a shield against sovereign credit system volatility and as material assets in great power competition. On one hand, focus on traditional precious metals like gold and silver to hedge structural dilution risks of the dollar credit system; on the other hand, strategically develop key mineral resources (such as rare earths, lithium, cobalt, nickel, high-purity quartz), viewed as the “new oil” supporting AI computing power and energy transition, with pricing power and supply chain security directly defining the upper limit of national technological competition.

The second main line is core technological assets, which are the productivity engines determining the outcome of great power competition. This is not merely about domestic substitution but involves building full-stack autonomous innovation capabilities amid global industrial chain restructuring. Specific areas include: (1) AI and semiconductors, covering advanced process, GPU/HBM, semiconductor equipment, materials, and software ecosystems; (2) commercial space and low-altitude economy, including satellite manufacturing, rocket launches, and space information services; (3) frontier energy technologies, such as controlled nuclear fusion, with high potential for reshaping the future, though still in early stages.

The third main line is security assets, summarized as “national subscription”—areas where the state must continuously and rigidly procure for strategic security. Since these are highly concentrated in government and state-owned enterprises, their demand remains stable across economic cycles. This includes traditional defense and military industries under geopolitical pressure, digital security sectors like cybersecurity and data protection, and critical infrastructure and foundational technology sectors—covering power grid resilience, financial IT systems, industrial control systems, and core software—forming the absolute barriers to economic and social stability.

Risk Warning and Disclaimer

Market risks exist; investments should be cautious. This article does not constitute personal investment advice and does not consider individual user’s specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions herein are suitable for their circumstances. Investment involves responsibility for the outcomes.