Asset Allocation Shifts Amid Erosion of Global Currency Credibility: From Hard Resources to Long-Term Investment

Asset Allocation Shift Amid Global Currency Credibility Erosion: From Rigid Resources to Long-Term Investment

Against the backdrop of widening tension between global monetary policy and fiscal discipline, international capital is reassessing the value anchors of various asset classes. In a recent market observation, Metrics Ventures noted that as the credibility of major Western central banks continues to weaken, resource assets with rigid supply constraints—such as gold, copper, and electricity—are becoming the preferred direction of capital flows, while crypto assets, which are relatively dependent on liquidity expansion, will find it difficult to generate excess returns in the short term. Based on this observation, this article systematically analyzes the current structural changes in global markets and their long-term allocation implications from the perspective of institutional investors.

Market Background

Since 2026, concerns in global financial markets about the dollar-based credit system have deepened. In the bond market, the yield curve has steepened at an accelerating pace, reflecting the market's profound skepticism about the effectiveness of the Federal Reserve's policy tools. Specifically, divisions at the level of Fed internal governance have become public: on the one hand, Fed Chair Warsh's remarks failed to reassure the market and instead intensified the steepening of the yield curve; on the other hand, the U.S. Treasury directly used the FIMA (Foreign and International Monetary Authorities Repurchase Facility) to provide dollar liquidity to foreign central banks, bypassing the Federal Open Market Committee. This effectively shows that the dollar's credit problem can no longer be resolved by successive Fed chairs through verbal intervention, and the boundaries between the roles of fiscal and monetary policy tools are becoming blurred.

Meanwhile, the launch of joint U.S.-Japan foreign exchange intervention, along with the policy interactions between Warsh and Treasury Secretary Bessent, has further exposed policy incoordination among advanced economies in responding to the currency credibility crisis. A typical expectation of "competitive devaluation" has emerged in the market—namely, that central banks no longer believe in verbal commitments but are instead competing through concrete actions to gain relative advantages. This environment is precisely the important foundation that enables gold and silver to bottom out first in the price cycle. It can be said that the bond and foreign exchange markets are casting a vote of no confidence in fiscal and monetary authorities through actual price behavior.

Current Capital Flows

At the level of asset performance, capital flows exhibit a clear hierarchy. First are precious metals: after the earlier correction, gold and silver have already shown signs of a bottom reversal, which many institutions view as a manifestation of the consensus among global central banks of "competing to be the least bad." Second are base metals: copper spot prices have already taken the lead in hitting record highs, and the rigid constraints of supply chains have made it the frontrunner in this round of resource market rally. At the same time, the stock indices and currency exchange rates of key resource-rich countries are at the tail end of a directional choice, reflecting the market's reassessment of the economic prospects of resource-exporting countries.Within the equity market, U.S. stocks, after selectively clearing some leverage, have regained an optimistic attitude toward the growth narrative, but bond and foreign exchange markets continue to send negative feedback, showing a clear divergence in judgment on the same credit issue. Notably, RMB assets have performed outstandingly in this round of adjustment, with core assets represented by the STAR 50 Index showing a clear bull market trend. This is not accidental, but rather the result of global capital searching for a new "value anchor" against the backdrop of a loosening dollar-based system.

In contrast, the crypto asset market remains in a consolidation pattern. Although Bitcoin is viewed by some investors as "digital gold," in the current macro environment its price fluctuations are more driven by liquidity expectations. As global liquidity has not yet seen significant easing, and the marginal growth rate of AI-related assets is slowing, crypto assets will find it difficult to obtain sufficient incremental capital support in the short term, so their performance is relatively lagging.

Investment Logic Analysis

The key to understanding the above capital flows lies in recognizing that "monetary credibility" has become the scarcest asset of the current era. Advanced economies have long relied on debt expansion and monetary easing to maintain growth, but the other side of the coin is the continuous dilution of money's real purchasing power. When central bank independence is eroded by fiscal dominance, trust in the fiat currency system gradually disintegrates. Gold, as a natural non-sovereign credit asset, tends to absorb funds before other assets during periods of global excess liquidity; this is also one of the reasons it started moving earlier than Bitcoin.

Copper and electricity represent another kind of structural logic. Under the global trends of carbon neutrality and energy transition, copper, as a key raw material for electrification infrastructure, has long-term rigid demand; electricity itself, constrained by the physical limits of grid capacity and power generation capacity, is also in a state of low supply elasticity. Such "rigidly constrained resources" have stronger pricing power during inflation cycles and can help portfolios resist currency depreciation risk.

For non-U.S. assets, especially RMB assets, their bull market trend reflects the increasing multipolarity of the global reserve currency system. As a major global manufacturing and resource-importing country, China's layout in green technology, high-end manufacturing, and other fields provides new growth drivers for its capital markets. From a valuation perspective, the current share prices of some resource companies imply a "free call option" on rising metal prices. Against the backdrop of slowing marginal AI growth, the risk-reward ratio of such assets appears even more prominent.

Metrics Ventures has clearly stated that from a medium-term perspective, copper, electricity, and gold remain the most preferred asset directions. As for the crypto market, two conditions must be awaited: first, the true release of excess liquidity; second, the market fully pricing in the marginal growth rate of AI technology. Only when both are completed can digital assets be expected to see a new round of clear trend moves.

Risk FactorsOf course, any long-term allocation logic must confront real-world risks. The first is monetary policy uncertainty. The Fed has not yet clarified its interest rate path, and fiscal pressures may force policy to remain accommodative, thereby increasing the risk of an inflation rebound. In this scenario, interest rate volatility could simultaneously hit both stock and bond markets, creating a liquidity shock. Second, escalating geopolitical conflicts, especially events involving core resource-supplying countries, could lead to severe price volatility. Third, US equity valuations remain at historically high levels; if corporate earnings growth falls short of expectations, the risk of valuation correction cannot be ignored.

In addition, trading in resource-related assets has become relatively crowded in the short term. If global economic growth slows markedly, market concerns over the demand side may trigger a rapid cooling of resource prices. Finally, the crypto market remains in a period of regulatory exploration, and rules for digital assets in major economies are not yet clear, which increases policy risk for this asset class. When incorporating alternative assets into their portfolios, institutional investors need to give full consideration to liquidity management and drawdown control.

Looking ahead over the next 3 to 10 years, the rebuilding of global monetary credibility will be a long and tortuous process. Once cracks appear in the dollar system, they are often difficult to heal in the short term, which will continue to strengthen the role of gold and resource-related assets in strategic allocations. The advancement of the energy transition will drive long-term prosperity in copper, electricity, and related infrastructure investment. This is not only a major theme for regions such as China and Europe, but also a long-term theme that global capital must watch.

At the same time, the long-term investment logic of AI will not disappear, but the market will pay more attention to real profitability and the efficiency of technology deployment. As AI's marginal growth rate gradually diminishes, capital may shift from highly valued application layers to infrastructure and resource layers, which will further benefit the energy, computing power, and upstream materials industries. As for crypto assets, their maturation process requires the support of regulatory compliance and a liquid environment, and they may be repriced in the next round of global monetary easing.

For institutional investors, the above evolution points to a more diversified asset allocation direction: within traditional equity and bond portfolios, moderately increase investment in commodities such as gold and copper, as well as related energy infrastructure, while retaining exposure to long-term structural growth themes. Such an allocation can both hedge against currency credibility risk and capture emerging opportunities in the global transformation, thereby achieving true portfolio diversification in a macro environment full of uncertainty.