"Golden Eyes, I found your weakness. Golden Eyes, this is no time for tenderness. Time is not on your side. A bitter kiss will bring you to your knees." Tina Turner. Migration to California, the "Golden State," began in 1849. The gold mines discovered around San Francisco drew adventurous adventurers with excitement. Those who set out with picks and shovels faced harsh conditions. Today, a global gold rush is underway thanks to the technologies developed in the same region. Now, people are hitting the road and mining gold digitally in the commodity world without changing their residence. Global and digital gold enthusiasm is bringing with it inflated prices, particularly through transactions conducted through digital funds (ETFs). ETF inflows and outflows accelerate liquidity flows. When volatility increases, financial balances can be disrupted.
Another 25 basis point interest rate cut and a stable balance sheet. The Fed's balance sheet contraction was a key component supporting interest rate policy. The quantity channel was effectively used to control inflation after the pandemic, and market liquidity has retreated to a certain extent. The Fed's decision to abandon this tool now means it has adopted a more neutral stance. Chairman Powell stated that the impact of Trump's tariffs on some items is limited and temporary. He stated that he could stay. After 100 basis point cuts at the end of last year (2024), the Fed, which was waiting for Trump's policies to become clearer, resumed interest rate cuts in September. The Fed is leaving Trump's trade uncertainty behind. It appears that the Fed, having brought inflation under control, will focus on growth, particularly the labor market, going forward. Gold prices are influenced by the value of the currency rather than economic cycles; therefore, the Fed's neutralized stance could stabilize the value of the currency in the short term. In an environment where inflation is under control and uncertainty has diminished, further interest rate cuts by the Fed for economic reasons may not be enough to boost gold prices. Therefore, this neutralization by the Fed is, first and foremost, a "breathing" signal. Gold's new theme is: "Slow down for now, wait for a catalyst."
When the US was at the mercy of the inflation monster in the 1970s, gold prices went through a similar process. Prices, which peaked hyperbolically in 1980, were again rapidly declining due to the Fed's anti-inflationary policies at that time. It faded. A similar movement occurred in the aftermath of the 2008 global financial crisis. The hyperbolic peak in 2011, when the Fed extinguished the financial fire, plummeted from $2,000 per ounce to $1,000: After a very steep climb in a very short time, the pullbacks are deep. Current data from the World Gold Council shows that total demand broke a record with 1,313 tons in the third quarter of 2025, and that 222 tons of ETF inflows driven by investors accelerated the "herd effect" (fear of missing out 🡪 FOMO). During the same period, jewelry demand fell by 19%. This picture resembles the behavioral path seen before the price peak in the late 1970s. Indeed, when prices moved slightly the previous week, the outflow from ETFs occurred sharply. The inflation-exchange rate fragility of the 1970s is similar to today; but the sharp swings experienced in the final act of that period are also remembered. The last participants in the herd movements (FOMO) are the latecomers. Momentum players are in trouble.
The gap between gold (+66%) and oil (-20%) has widened in 2025; a gap similar to the gap between the 1930s and 2008 on the century-long chart. Such divergences suggest that if stock prices "return to normal," markets could face a deflationary test. In other words, the "hedge" demand and the "real activity" signal are at odds, creating a momentum-driven but fragile mix for the gold narrative. The Fed's stabilization of the currency is a development that reduces the need for debasement trading. Gold, a store of value, feeds on inflation with its "anti-currency" properties; disinflationary cycles are not supportive for gold. Under deflationary conditions, policy responses are decisive. If the shock remains economic and a financial crisis does not occur, deflation could steal gold's shine.
Confirmation of the Fed's independence and the "above-politics" clarification of communication: "Institutional Because it will increase “confidence,” it will reduce gold’s political premium, and systemic risk anxiety (FOMO) will fade. If central bank purchases slow down: For example, those who have reached their target shares will start selling “net.” The Philippines indicated last week that it may reduce its excess gold reserves! If dollar weakness reverses: If US-China risks subside and debt concerns cool, the debasement narrative will recede.
In gold, regimes are long-lasting and occur in two directions. Long regimes, patient cycles… That framework still works today: As long as the Fed, the master of gold rallies, maintains its grip, the gold narrative may occasionally slow down, perhaps even undergo a deep correction, but it won't completely collapse; regimes are established over years, debated over months. That's why we're still working with the same pickaxe, in different soil: digging for data, searching for the spark.
