GUOSEN SECURITIES: Gold 4400 is the "beginning of the end" for US dollar hegemony

According to the Zhitong Finance APP, Guosen Securities released a research report stating that in October, gold rose to nearly 4400 (USD/ounce, the same below), and then fell below 4000. The 4400 mark for gold is a milestone price, indicating that the total market value of gold is roughly on par with the total scale of U.S. Treasury bonds. This reflects gold's first challenge to the global reserve currency status of U.S. Treasury bonds and marks the "beginning of the end" of U.S. dollar hegemony. If the U.S. fiscal policy does not improve its balance of payments, the long-term upward trend of gold is unlikely to stop. In the long run, if gold breaks through 4400 and its market value surpasses that of U.S. Treasury bonds, it will be a highly certain event.

The main points of Guosen Securities are as follows:

Reassessing U.S. Treasury Bonds - Once the Global Reserve "Good Currency"

In the theory of asset allocation - the "substantive supply" system, the growth rate of substantive supply determines the investment/holding value of an asset. The lower the growth rate, the scarcer the asset, and the more valuable it is. For a currency, if the growth rate of substantive supply > actual economic growth rate, it is positioned as a "circulating currency"; if the growth rate of substantive supply < actual economic growth rate, it is positioned as a "store of value currency."

After the abandonment of the gold standard in the 1970s, the U.S. dollar (growth rate of substantive supply = M2 growth rate) became a circulating currency, while U.S. Treasury bonds (growth rate of substantive supply = non-interest deficit/initial debt scale) became a store of value currency. The dollar and U.S. Treasury bonds together constructed a dual-track global reserve credit currency system. With the two rounds of aggressive debt expansion by the U.S. federal government in 2008 and 2020, U.S. Treasury bonds have been "diluted" twice and have lost their status as a store of value currency.

Gold is the only remaining global store of value currency, and its market value catching up to U.S. Treasury bonds is just the beginning

The growth rate of gold's qualitative supply (amount mined) is less than 2%, meeting the definition of a store of value currency. Before 2020, gold and U.S. Treasury bonds jointly performed the function of a global store of value currency. Due to some additional conveniences of U.S. Treasury bonds, gold held a secondary position, with a total market value lower than that of U.S. Treasury bonds; however, after the "dilution" of U.S. Treasury bonds, gold became the only remaining global store of value currency and began to replace U.S. Treasury bonds.

Currently, the total scale of U.S. Treasury bonds is approximately 32 trillion USD, and the amount of gold mined is expected to reach 220,000 tons by 2025, approximately 7.1 billion ounces. Dividing the total scale of U.S. Treasury bonds by the amount of gold mined gives a gold price of 4400-4500. In the face of this milestone price, gold may need time to test repeatedly, but I believe that 4400 for gold is just the beginning, not the end.

Restructuring federal fiscal discipline is almost the only way to break the logic of gold

The key issue with currency lies in the behavior of printing money. The undisciplined U.S. federal fiscal policy has caused gold and U.S. Treasury bonds to diverge, while the undisciplined monetary policy of the Federal Reserve has accelerated this process. To break the long-term bullish logic of gold, restructuring fiscal discipline is almost the only solution.

The growth rate of substantive supply for U.S. Treasury bonds is non-interest deficit/debt scale. If U.S. Treasury bonds want to restore their good currency status, then the growth rate of substantive supply must return to below 2% for a long time. This means that the non-interest deficit must be limited to within 640 billion USD, plus about 1.15 trillion USD in interest expenses, making the overall deficit less than 1.79 trillion USD. Currently, the market consensus for the U.S. federal deficit in 2026 is 2.1 trillion USD In other words, cutting approximately 3.1 trillion in non-interest deficits is necessary to break the substitution logic of gold for U.S. Treasury bonds. This is difficult to achieve in the current United States.

Risk Warning

Uncertainty in U.S. fiscal policy; uncertainty in U.S. monetary policy; uncertainty in the geopolitical and economic landscape of the U.S. and the world; uncertainty in gold exploration