Gold has surged more than 60% this year — its strongest run in 46 years — pushing prices to their highest level ever in inflation-adjusted terms. Historically, assets that climb far above their long-term trend tend to fall back, just as gold did after its late-1979 peak, when it dropped nearly two-thirds in five years. Today’s rally raises the same question: bubble or paradigm shift?
Gold’s value has always reflected the monetary backdrop. It jumped after the 1920s credit collapse, soared during the 1970s inflation shock, slumped when real rates stayed high in the 1980s–90s, and rallied again after the Fed cut rates in the early 2000s. Even during the 2008–2022 era of zero rates and QE, gold’s long-term trend stayed upward.
The recent surge is different. Gold has risen despite falling inflation and rising real yields — breaking the old rule that it moves inversely to real rates. Analysts say the shift began when the U.S. froze Russia’s foreign reserves in 2022, prompting many central banks to seek assets that cannot be seized. Their answer: gold.
For three straight years, central banks have bought more than 1,000 tonnes annually, with emerging economies still underweight. Yet retail and Wall Street participation remains weak: ETF holdings are below 2020 levels, gold-miner ETFs have shrunk, and analysts’ long-term price forecasts remain far below spot.
The macro backdrop also differs sharply from the 1970s. The U.S. was a creditor then; today it is the world’s biggest debtor. Government debt relative to GDP is nearly four times higher, deficits are structurally large, and the Fed cannot pursue a Volcker-style tightening without destabilizing highly leveraged markets.
Given fiscal strain, geopolitical uncertainty, and weakening trust in fiat reserves, today’s gold rally may reflect something deeper than speculation. But for the bull run to continue, one more shift is needed: private investors — still largely absent — must join the trend.
