BOCI China believed that the US's introduction of “reciprocal tariffs” can be deemed as a policy measure to curb the global US dollar cycle, reflecting the US government's choice to fortify American hegemony at the cost of sacrificing US dollar hegemony when facing the “Triffin dilemma”.

In this sense, “reciprocal tariffs” is a landmark event marking the decline of the global US dollar cycle. The subsequent weakening of the US dollar and US bonds, along with the strengthening of gold prices, are manifestations of the turning point in the global US dollar cycle.

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BOCI China mentioned that the unusually high gold prices in 2025 are also tied to the turning point in the global US dollar cycle. Typically, gold is a special commodity with risk-aversion attributes, showing visible counter-cyclicality: when the global economy booms, gold price upswing tends to lag behind industrial raw material prices; when the global economy wanes, gold prices tend to outstrip industrial raw material prices.

Over the past 40 years, this counter-cyclicality of gold prices has been quite noticeable. However, since June 2024, the situation has changed. Over the past year and beyond, the international economic climate, as measured by the OECD leading index of the G7 industrial countries, has improved considerably, reflecting an overall positive international economic climate.

With reference to the past 40 years of experience, gold prices should underperform industrial raw material prices at this time. But standing in contrast, during this period, the excessive rise in gold prices relative to industrial raw material prices has not subsided but amplified, even marking a new peak in 40 years, utterly breaking the historical pattern of the past 40 years.

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The unusual surge in gold prices reflects a turning point in the global US dollar cycle. Although no alternative to the US dollar has been found yet among various international payment tools (including gold), the decline in confidence in the US dollar still affects the prices of various assets.

For international investors, although no substitute for the US dollar has been identified, it is reasonable to reduce US dollar assets and increase gold in their asset allocation. This likely explains the unusual rise in gold prices.

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