Guosen: Gold at 4400 is the "beginning of the end" of US dollar hegemony.

Guosen released a research report stating that in October, gold rose to nearly 4400 (USD/ounce, the same below) and then fell back below 4000. Gold reaching 4400 is a milestone price, meaning that the total market value of gold is basically on par with the total size of US debt, symbolizing gold's first challenge to the global reserve currency status of US debt, and also the beginning of the end of US dollar hegemony. If the US fiscal policy balance does not improve, the long-term rise of gold is unlikely to stop. In the long run, breaking through 4400 and surpassing the market value of US debt is a high probability event. Guosen's main points are as follows: Reassessing US debt - Once the global reserve "good currency" In the theory of asset allocation in large categories - the "substantive supply volume" system, the growth rate of the substantive supply volume determines the investment/holding value of the asset. The lower the growth rate, the scarcer the asset, the more valuable it is. For a currency, if the growth rate of the substantive supply volume > actual economic growth rate, its positioning is as a "circulating currency"; if the growth rate of the substantive supply volume < actual economic growth rate, its positioning is as a "value storage currency". After the collapse of the gold standard in the 1970s, the US dollar (substantive supply volume growth rate = M2 growth rate) became a circulating currency, while US debt (substantive supply volume growth rate = non-interest deficit/initial debt size) became a value storage currency. The US dollar and US debt together formed a dual-track global reserve credit currency system. With the two rounds of aggressive debt expansion by the US federal government in 2008 and 2020, US debt has been "diluted" twice and has lost its status as a value storage currency. Gold is the only global value storage currency left, and equaling the market value of US debt is just the beginning Gold's growth rate of substantive supply volume (already extracted amount) is less than 2%, meeting the definition of a value storage currency. Before 2020, gold and US debt jointly performed the function of global value storage currency. Because US debt has some additional conveniences, gold has been in a secondary position, with a total market value lower than the scale of US debt; but after US debt was "diluted", gold became the only global value storage currency left, starting to replace US debt. Currently, the total size of US debt is approximately 32 trillion USD, and the extracted amount of gold is expected to reach 220,000 tons by 2025, equivalent to 7.1 billion ounces. Dividing the total size of US debt by the extracted amount of gold will yield a gold unit price of 4400-4500. In the face of this milestone price, gold may need time to repeatedly test, but I believe that 4400 for gold is just the beginning, not the end. Reforming federal fiscal discipline is almost the only way to break the logic of gold The key to the currency issue lies in the printing behavior. The lack of discipline in the US federal fiscal policy has caused gold and US debt trends to diverge, while the undisciplined monetary policy of the Federal Reserve has accelerated this process. To break the logic of gold's long bull market, reshaping fiscal and monetary discipline is almost the only solution. The growth rate of the substantive supply volume of US debt is the non-interest deficit/debt size. If US debt is to regain the status of a good currency, then the growth rate of the substantive supply volume must return to below 2% in the long term. The non-interest deficit must be limited to within 640 billion USD, plus approximately 1.15 trillion USD in interest expenses, with the overall deficit being less than 1.79 trillion USD. Currently, the market's unanimous expectation for the US federal deficit in 2026 is 2.1 trillion USD. In other words, cutting approximately 310 billion of the non-interest deficit would break the logic of gold's replacement of US debt. This is difficult to achieve in present-day America. Risk warning Uncertainty in US fiscal policy; Uncertainty in US monetary policy; Uncertainty in US and global political and economic situations; Uncertainty in gold exploration.