Recent large-scale conflicts in the Middle East over the weekend have sharply escalated regional tensions. Geopolitical uncertainties are currently impacting gold assets, and the sustainability of these effects warrants close attention. Additionally, last week, the U.S. Supreme Court ruled tariffs under IEEPA illegal, while former President Trump invoked Section 122 to impose new global tariffs. With frequent global black swan events, gold's role as a safe-haven asset has become increasingly prominent.
Beyond immediate geopolitical disturbances, medium-term factors also support gold. Due to pressure from rising U.S. Treasury interest payments, the White House has shown a clear inclination toward interest rate cuts. Historical stances of the new Federal Reserve Chair Warsh suggest potential support for monetary easing. U.S. January CPI and core CPI both hit five-year lows, while February S&P Global PMI, Q4 2025 real GDP, and consumer confidence indices fell short of expectations. A significant rise in oil prices could push the U.S. into a stagflation cycle, a period in which gold has historically performed well. Major international financial institutions, including JPMorgan, Bank of America, UBS, and Deutsche Bank, anticipate gold may surpass new highs of $6,000.
In 2026, the U.S. is expected to increase fiscal spending on welfare, infrastructure, and defense. However, sharp declines in tariff revenues and potential refunds of previously collected tariffs could exacerbate fiscal deficits. Japan and Europe also face growing fiscal pressures. As the Federal Reserve’s independence weakens and rising deficit ratios undermine the credibility of the U.S. dollar and Treasury bonds, global de-dollarization trends are deepening. European nations such as Denmark, Poland, Sweden, and Hungary are reducing their holdings of U.S. Treasuries or increasing gold reserves. Emerging market central banks’ gold reserve ratios remain significantly below the global average, providing strong incentives for continued gold asset allocation. Rising demand is expected to push gold and gold equities to higher price levels.
The top ten constituents of the CSI Shanghai-Hong Kong Gold Stock Index maintained a high growth rate of 62% in the first three quarters of 2025, meeting market expectations. Leading gold mining companies have also released strong annual earnings forecasts, drawing market attention. This growth is driven by rising gold prices and expanded production by mining firms. Based on expectations for gold price trends in 2026 and production guidance from domestic gold miners, this trend is likely to persist. As of February 28, assuming a gold price of $5,000 per ounce, the average forward PE ratio for major gold mining companies in 2026 is only 9–16x, compared to a historical average of around 20x, indicating significant room for valuation recovery. Overall, gold equities are poised for a potential "Davis Double Play" of rising earnings and valuations, making them an attractive investment opportunity.
Note: Central bank gold purchase and reserve data sourced from the State Administration of Foreign Exchange and the World Gold Council, as of December 2025. Gold mining company valuation data sourced from Wind, as of January 30, 2026. Past index performance does not guarantee future results and does not constitute a promise of fund performance.
The CSI Shanghai-Hong Kong Gold Industry Stock Index (the "Underlying Index") is compiled and calculated by China Securities Index Co., Ltd. ("CSI"), which owns all rights to the index. CSI makes no express or implied warranties regarding the timeliness, accuracy, completeness, or suitability of the index and assumes no liability for any delays, omissions, or errors. CSI does not endorse, promote, or guarantee any products tracking the index and bears no related responsibility.
Views are for reference only and do not constitute investment advice.
Risk Disclosure: All investments involve risk. Fund managers manage assets with integrity and diligence but do not guarantee profits or minimum returns. Past performance and net asset value do not indicate future results. The performance of other funds managed by the same manager does not guarantee the performance of this fund. Different types of funds carry varying risk-return profiles; generally, higher expected returns come with greater risks. Investors should carefully review legal documents, understand risk-return characteristics, assess their risk tolerance, and make informed decisions.
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