Who defeated the "gold standard"?

Virtual Money outperforms due to payment convenience, premium from technological innovation, and supply scarcity. The Bitcoin Halving mechanism strengthens its 'digital gold' property, providing investors with an alternative allocation to counter the weakening of the dollar's credit, especially during periods of frequent geopolitical conflicts.

Written by: Li Xiaoyin

Source: Wall Street Watch

Against the backdrop of the normalization of global geopolitical risks, the weakening of the US dollar credit system, and the rising economic uncertainty, gold has become the "yardstick" for measuring asset value.

Analysts Liao Jingchi and Wang Daji from Zhejiang Merchants Securities stated in a research report released on the 16th that under the hypothetical "gold standard" framework, the assets that have outperformed gold since 2018 are extremely limited, with only a few virtual money, micro-cap stock indices, precious metals sectors, and small-cap factor strategies recording positive returns.

The research report states that this reflects macro characteristics such as the weakening of dollar credit, the normalization of global geopolitical risks, and the rising economic uncertainty, highlighting the long-term allocation value of gold as a safe-haven asset.

From an industry perspective, Zheshang Securities pointed out that long-term high dividends are relatively resistant to declines, while recently, financial technology, especially Virtual Money, has led significantly; among secondary industries, precious metals stand out, with new momentum outperforming old momentum; from the perspective of style and strategy factors, small market capitalization is the absolute winner, with the micro-disk stock index outperforming gold in all periods.

Major Asset Classes: Virtual Money Stands Out, While Others Are Mostly Driven by Liquidity

According to a report by Zhejiang Securities, from March 2018 to June 2025, among the major assets priced in gold, only a few virtual money recorded positive returns, while other categories generally underperformed.

The report points out that virtual money outperforms due to the convenience of payment, the premium from technological innovation, and supply scarcity, such as the Bitcoin halving mechanism reinforcing its "digital gold" property. For investors, this provides an alternative allocation to counteract the weakening of the dollar's credit, especially during periods of frequent geopolitical conflicts.

Equity assets have shown strong nominal growth, but gold prices have weakened, primarily relying on liquidity injections, such as the peak growth rate of 26.7% in the US M2 driving the US stock market. However, after excluding "monetary illusion," real returns are limited, signaling investors to be wary of the downside risks when liquidity recedes.

The weak performance of fixed income and commodities reflects the rising economic uncertainty. The tight supply and demand for silver makes it relatively resistant to declines, but crude oil has fallen by 61.7% due to the increase in shale oil production, which may exacerbate the volatility exposure for energy investors.

In the real estate sector, the price declines in the United States and India are relatively minor, benefiting from economic resilience and demographic dividends, but overall lag behind gold.

Industry Performance: New Momentum Outperforms Old Momentum, High Dividends Provide Cushion

The report shows that since 2018, all CITIC primary industries have underperformed gold, but resource products and new driving forces have been relatively strong, such as coal and banks with high dividends (averaging 5.8% and 4.8%), which have narrowed the gap. If dividends are taken into account, the underperformance is even smaller.

At the same time, new energy industries represented by electric new energy and TMT have underperformed less than the old energy represented by the real estate chain.

In the past year, with the transformation of China's economy from old to new driving forces, large financial and technology sectors have outperformed comprehensive finance, non-bank finance, as well as the computer, media, and defense industries, surpassing gold, mainly benefiting from an increase in risk appetite, the catalysis of virtual money themes, and the revaluation of technology assets. In contrast, resource products, consumer goods, and the real estate chain have significantly underperformed.

In the secondary industry, since 2018, precious metals have dominated the performance. Since 2018, emerging technologies such as semiconductors have outperformed old technologies. A dumbbell allocation (such as banks + consumer electronics) can narrow the decline by 39.8%, achieving a more robust performance.

In the past year, sectors such as large finance, new consumption, technology, and military industry have outperformed emerging financial services II (related to digital currency), securities II, cultural entertainment (self-entertainment new consumption), semiconductors, and weapons and equipment II, surpassing gold. This is mainly benefited from the rise in risk appetite, the catalysis of virtual money themes, and the revaluation of technology assets.

The weakness of resource products and real estate chains reflects a lack of demand, and investors may need to adjust to varieties with higher profitability certainty.

Style and Strategy: Small Market Cap Dominance, Highlighting the Reverse Mechanism of Micro Stocks

From the perspective of style and strategy factors, small-cap stocks have become the absolute winners.

In the A-share weight style, the report shows that since 2018, only the micro-disk stock index has outperformed gold, benefiting from the reverse investment mechanism, low valuation, and liquidity premium. Its price fluctuations are negatively correlated with ROE and positively correlated with PB.

In the past year, micro-cap stocks and financial styles have outperformed gold. It is noteworthy that the dividend style has underperformed significantly, with severe internal differentiation; only banks have shown strong performance, while other cyclical dividend varieties have performed poorly.

In terms of strategy indices, small-cap factors are clearly leading, with relatively good performance forecasts. Since 2018, the small-cap size factor has outperformed gold in Shanghai, while large-cap has lagged behind, reflecting that industry updates favor emerging small caps.

The main viewpoints of this article come from the report "Who Defeated the 'Gold Standard'? - In-depth Review of Assets, Styles, Industries, and Gold" published on July 16 by Zheshang Securities analysts Liao Jingchi, Wang Daji, and Gao Qisheng.