CICC Recommends Continued Overweight in Gold

CICC Research said that the two narratives that previously suppressed gold are being disproved: first, global liquidity has not really entered a tightening cycle; second, "de-dollarization" has not ended. As U.S. inflation falls and growth slows, the economic fundamentals support monetary policy turning toward easing. Meanwhile, high debt, high deficits, and policy uncertainty have structurally eroded dollar credit, which is difficult to reverse. In the second quarter, global central banks' net gold purchases rebounded to 289 tons, a year-on-year increase of 62%, hitting a record high for the second quarter. This reflects deep-rooted concerns among global central banks about the dollar, and reserve diversification will continue to support gold demand in the medium to long term. CICC believes that the gold bull market is not over, and the window to add positions has reopened after the previous adjustment, recommending continued overweight in gold.

Is Global Liquidity at an Inflection Point?

In the first half of 2026, global assets suffered two liquidity tightening shocks—the nomination of Warsh as Fed chair in January and the outbreak of the U.S.-Iran conflict at the end of February—which led to a comprehensive reversal of global central bank rate-cut expectations to rate-hike expectations, a phased strengthening of the dollar, and pressure on major asset classes such as stocks, bonds, and gold. The market worried that liquidity was approaching a tightening inflection point.

To comprehensively track global liquidity, we aggregated the central bank balance sheets, M1 and M2 totals of major economies including China, the United States, the Eurozone, Japan, the United Kingdom, and Canada, and calculated their year-on-year growth rates. We found that the trends of these three liquidity indicators are basically consistent. Although liquidity indicators have fallen since February 2026, a tightening inflection point has not yet been confirmed. M1 and M2 are still in expansion territory, and the growth rate of central bank balance sheets has turned mildly negative.

From a country perspective, China currently contributes most positively to M1, M2 and central bank total asset growth among major economies, while the United States also contributes strongly to M1 growth. In contrast, Japan is the only negative contributor to both M1 and M2, and its central bank total assets are still shrinking.

We found that the year-on-year change in M2 of major economies leads U.S. and Chinese stock performance by about 3 months and commodity performance by about 6 months. According to the above analysis, despite significantly tighter liquidity expectations in the first half of the year, global liquidity in fact continues its loose trend.

Looking ahead, global liquidity is expected to become more relaxed in 2026H2. In the 2026H2 macro asset outlook released in early June, we proposed that the market's worries about geopolitical escalation, inflation resilience, and Fed tightening may be "false risks." The more likely scenario in the second half of the year is easing geopolitical conflicts, a downward trend in inflation, and a dovish turn in Fed policy. Global liquidity may become further relaxed.

In the past two months, our "contrarian" forecast has initially been borne out: on inflation, U.S. inflation did not show resilience, with June CPI inflation falling more than expected, with headline CPI falling 0.4% month-on-month and core CPI nearly flat. On policy, the July FOMC meeting did not deliver a "preemptive rate hike," but instead sent a clear dovish signal.

As global liquidity becomes more relaxed, the upward pressure on real interest rates and the dollar eases, and gold may regain dual support from liquidity and diversification of the monetary system. CICC believes that the gold bull market is not over. After the previous adjustment, the window to add positions has reopened, and it is recommended to continue overweighting gold.