Original | Odaily Planet Daily (@OdailyChina)
Author | Xiao Fei
Today, many bloggers are trying to use the events of 1979 as a rigid analogy to understand the recent consecutive pullbacks in gold.
The path does indeed look similar: Middle East conflict, rising oil prices, resurgent inflation, gold rising first and then falling. Simply comparing the K-line charts might seem sufficient to pontificate.
But upon closer examination, the operating logic of the entire world and macro expectations have undergone earth-shattering changes. Armchair strategizing by drawing K-lines is meaningless, but a comparative exploration of the underlying fundamentals can allow us to glimpse the bigger picture.
Learning from History: What Happened in 1979
The key to 1979 lies in two events following the Iranian Revolution.
The first event was the Fed drastically changing the entire game rules with extreme interest rate hikes. After Paul Volcker took office, he pushed interest rates all the way up to nearly 20%. At such interest rate levels, holding cash itself became the best asset, and gold, which yields no return, was systematically abandoned.
The second event was the global flow of funds back into the US credit system. The Cold War entered a period of detente, US-Soviet confrontation ceased to escalate continuously, and the US began moving towards unipolar dominance. Around 1982, the market was trading on the expectation of "the US re-stabilizing the global order." Funds returned to dollar-denominated assets, and gold lost its support.
Therefore, the rise and subsequent fall of gold back then was because soaring interest rates + strong enough US credit pushed the price down through the reconstruction of the authoritative system.
Today and Tomorrow: The System is Loosening
Applying the same logic today, the key variables are precisely the opposite; we are standing on the cliff on the other side of the mountain.
Today's reality is: US debt规模 has ballooned to its limit, the fiscal deficit is chronically out of control, the entire financial system is highly sensitive to interest rates, and not cutting rates already counts as tightening.
More noteworthy is the change in the underlying structure. The other reason for gold's decline back then was that global funds once again believed in the US.
But the nature of the Middle East conflict today is completely different. It is not only not a local event that can be quickly concluded through negotiation (even though Trump occasionally spouts nonsense), but it has even evolved into a self-reinforcing system. This conflict is cyclically producing results and having叠加 effects: energy is being hit, shipping is being disrupted, costs are being pushed higher, finances are being burdened—all participants are locked into this structure.
Furthermore, this conflict touches the most core part of the dollar system—energy. If US control in the Middle East declines, if oil is no longer stably priced in dollars, or if relevant countries begin to重新选择 settlement methods, then the problem is not just oil prices, but: the petrodollar cycle itself could be shaken.
Once this narrative develops fissures, the foundation of dollar credit is no longer solid. And the "gold as a hedge narrative" we've always understood is inherently a hedge against this very credit system.
This comparison becomes quite interesting.
Over forty years ago, gold pulled back because that system became stronger. Now, the decline is happening during a process where the system itself is being challenged and颠覆. Back then it was "capital flowing back," now it's "capital searching for a new anchor."
Today's gold is closer to a阶段性 release: the sharp rise has already priced in the conflict and inflation, short-term funds are starting to realize profits, and the market is entering a rebalancing phase.
Changing Variables
Returning to the beginning, comparing the 1979 gold K-line with today's is of no value, but the "changing variables" within it are worth pondering deeply.
In 1979, the US dollar was the answer. In 2026, the US dollar is also being repriced.
The logic of how conflict transmits to inflation via energy, how inflation affects interest rates, and how interest rates change asset pricing is already different. Today's world has become more absurd, more complex, long past the era where order could be re-stabilized by one extreme interest rate hike.
With conflict spillover, Trump's policy flip-flops, energy prices remaining high, and the US no longer having the ability to suppress inflation with interest rates, the world might reprice the entire credit system.
At that moment, gold will also assume a new role.
