Should you buy crude oil assets or gold now? Zhang Yidong: Without a doubt, it must be gold!

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On March 25th, recent international tensions have caused fluctuations in domestic and overseas markets. Sina Finance interviewed Zhang Yidong, a member of the Executive Committee of Haitong International, Chief Economist, and Head of Research Department, to deeply analyze the topic “Reconstruction of the International Order: Opportunities Amidst Crisis, China’s Hard-Core Assets Long Bull Remains Unstoppable.”>> Live Video

Regarding whether the current price level is better for buying oil-related assets or gold, Zhang Yidong clearly states, without hesitation, it’s definitely gold. From tactical and strategic perspectives, gold currently has allocation value, with the core logic being that the foundation of the petrodollar system is undergoing intense upheaval.

Zhang Yidong pointed out that understanding this round of the gold bull market cannot rely solely on the strength of the dollar but must be viewed from the perspective of the reconstruction of the international financial order. In 1974, the U.S. and Saudi Arabia reached an “Unshakable Agreement”: the U.S. would provide military security to Saudi Arabia, and Saudi Arabia promised that oil trade would be priced and settled exclusively in dollars, using surplus oil revenues to purchase U.S. Treasury bonds, thus creating a petrodollar cycle. Over the following decades, the petrodollar became a core pillar of U.S. dollar hegemony.

“But in this round of Middle East conflicts, the U.S. cannot protect Saudi Arabia, cannot protect the UAE, and cannot safeguard these Middle Eastern oil-producing countries,” Zhang Yidong frankly states. When the U.S. can no longer provide basic security guarantees, the foundation of the petrodollar begins to shake.

This shake is not just theoretical but has been reflected in real trading data. Zhang Yidong revealed that three months ago, the proportion of RMB settlement in Saudi oil exports to China was less than 20%; by the end of March this year, that proportion had rapidly risen to 40%. “In just three months, it doubled, indicating that oil-producing countries are ‘voting with their feet’ through real actions.”

He believes this change is a microcosm of the “mutual decline” within the petrodollar system. In recent years, bilateral local currency swap agreements signed between China and Middle Eastern countries like Saudi Arabia and the UAE are accelerating in implementation amid the war, promoting diversification of international oil trade settlement currencies.

Looking back at history, during the Gulf War in 1990, the U.S. military achieved a swift victory, further consolidating the petrodollar’s position. However, this round of Middle East conflicts shows a different trend: the U.S. finds it difficult to quickly control the situation, and its “protection commitments” to allies are being challenged.

“Over the past two weeks, oil prices and the dollar have risen, while gold has fallen. This is partly due to profit-taking at the start of the year and also the inertia of the petrodollar mindset,” Zhang Yidong analyzed. But from a medium- to long-term perspective, gold’s essence is to hedge against global sovereign credit risks and is the “ultimate anchor” in the reconstruction of the international financial order.

He further supported this with data: when gold prices reach $5,600 per ounce, the total global gold market value is about $40 trillion, which coincides with the U.S. federal government debt scale at the end of 2024. “The logic of the gold bull market is to hedge the sovereign credit risks of major economies (including the U.S., EU, Japan, UK, and even G20 countries). Currently, global sovereign debt exceeds $100 trillion. From this perspective, gold is well-positioned both strategically and tactically.”

Zhang Yidong summarized that as the foundation of the petrodollar system loosens, the value of gold as the ultimate credit anchor will undergo systematic revaluation. Short-term fluctuations do not alter the long-term trend, and the current gold price correction provides investors with a good opportunity to deploy.

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Editor: Shi Xiuzhen SF183