Original | Odaily Planet Daily (@OdailyChina)
Author | Xiao Fei
Today, many bloggers are trying to understand gold's recent pullback by applying the events of 1979 in a misguided way.
The path seems indeed similar: Middle East conflict, rising oil prices, increasing inflation, gold rising first then falling—simply comparing the candlestick charts appears to be enough to make grand pronouncements.
But upon closer examination, the underlying logic and macro expectations of the entire world have undergone a dramatic transformation; drawing K-lines on paper is meaningless, yet examining the underlying fundamentals can offer us a glimpse of the bigger picture.
A look back at history: What happened in 1979
The key events of 1979 were the two events that occurred after the Iranian Revolution.
The first thing was that the Federal Reserve fundamentally changed the rules of the game with aggressive interest rate hikes. After Volcker took office, he pushed rates all the way up to nearly 20%. At such interest rate levels, holding cash itself became the best asset, and gold—a non-yielding asset—was systematically abandoned.
The second thing is the global reallocation of capital back into the U.S. credit system. As the Cold War entered a period of détente and U.S.-Soviet rivalry ceased to escalate, the United States began moving toward unilateral dominance. By around 1982, the market was pricing in the expectation of “America reestablishing global stability,” leading capital to flow back into dollar-denominated assets, causing gold to lose its support.
Thus, the subsequent rise and fall of gold that year was due to soaring interest rates and sufficient U.S. credit strength, with prices being suppressed by a restructured authoritative system.
Today and tomorrow: The system is loosening
Looking at today with the same logic, the key variables are exactly reversed—we are standing on the cliff on the other side of the mountain.
Today’s reality is: U.S. debt has swollen to its limit, fiscal deficits have been out of control for the long term, and the entire financial system is highly sensitive to interest rates—keeping rates unchanged is already considered tightening.
Another reason gold fell back then was that global capital regained faith in the United States.
But today, the nature of the conflict in the Middle East is entirely different—it is not merely a localized event that could be quickly resolved through negotiations (even if Trump occasionally speaks recklessly), but has instead evolved into a self-reinforcing system. This conflict generates outcomes in cycles and accumulates effects: energy supplies are targeted, shipping is disrupted, costs rise, and fiscal burdens grow—all participants are trapped within this structure.
Moreover, this conflict strikes at the very core of the dollar system—energy. If U.S. influence in the Middle East weakens, if oil is no longer stably priced in dollars, or if relevant countries begin to switch settlement methods, the issue will extend beyond oil prices to whether the petrodollar cycle itself will be undermined.
This narrative is cracking, and the foundation of the dollar's credibility is no longer stable. The "gold safe-haven narrative" we have always understood was, in fact, a hedge against this credit system.
This comparison becomes very interesting.
Over forty years ago, gold corrected because that system had become stronger. Now, the decline is occurring as the system itself is being challenged and overturned. Back then, it was “capital returning”; today, it’s “capital seeking a new anchor.”
Today’s gold movement is more akin to a阶段性 release: the surge has already priced in conflict and inflation, short-term capital is beginning to realize profits, and the market is entering a rebalancing phase.
Changing variables
Going back to the beginning, comparing the 1979 gold K-line to today’s毫无价值, but the "changing variables" within it are worth deep reflection.
In 1979, the dollar was the answer; in 2026, the dollar is being repriced.
How conflict transmits through energy to inflation, how inflation affects interest rates, and how interest rates alter asset pricing—the logic has changed. Today’s world is more absurd and complex than ever, long since no longer a world where a single aggressive rate hike can restore order.
Conflict spillover, Trump's erratic policy shifts, persistently high energy prices, and the U.S. no longer having the capacity to suppress inflation with interest rates may lead the world to reprice the entire credit system.
At that moment, gold will also take on a new role.