On the evening of October 10, global capital markets were thrown into chaos under multiple negative shocks. The US stock market lost over 1 trillion yuan in market value in a single day, with the Dow Jones index plummeting by nearly 880 points. The dollar index, oil prices, and digital currencies all tumbled simultaneously; yet amid this wave of asset crashes, gold defied the trend, with London spot gold prices surging past $4,017 per ounce, proving its resilience and confirming the market’s judgment of “unplugging the downward key.”
“The Western world’s move to freeze Russian assets after the Russia-Ukraine conflict is ‘confiscation,’ and it is one of the two biggest financial mistakes of the 21st century. It has triggered a rush for alternative currencies.” This was the pronouncement of Nassim Nicholas Taleb, famous for his “Black Swan” theory. This judgment turned out to be a prophecy—the Pandora’s box of gold has been opened since then and can never be closed again.
A month ago, on September 3, when gold had stabilized at $3,500 per ounce, the author analyzed its bullish logic in an article titled “The World Is Crazy, Money Is Flowing to Gold.” In just 30 days, gold prices have broken through the $4,000 threshold, with a gain of about 14%. During this period, events such as the US government shutdown and the Federal Reserve cutting interest rates by 25 basis points occurred, but the core logic supporting gold’s rise has never changed and has instead become stronger under multiple factors.
The core logic of gold’s trajectory has always revolved around the rule that “the lower the real interest rate, the stronger the rally.” The formula for calculating the real interest rate is straightforward: real interest rate = nominal interest rate – inflation expectations. As a zero-coupon asset, gold’s price shows a significant negative correlation with real interest rates. Looking back at market trends over the past 20 years, this pattern has been repeatedly validated: the periods of rising real interest rates from 2012 to 2018 and 2021 to 2022 corresponded to sharp declines in gold prices, while the periods of falling real interest rates from 2006 to 2012 and 2018 to 2021 saw gold prices soar. The current trend is extending this pattern.
The current market environment provides perfect conditions for gold prices to rise. The Federal Reserve began its rate-cutting cycle in September, announcing a 25 basis point cut, with market expectations of two more cuts this year, totaling a 75 basis point reduction, continuously pressuring nominal interest rates. Meanwhile, factors such as escalating trade tensions and others have kept U.S. inflation resilient, pushing up inflation expectations. Between the cut and the rise, real interest rates have naturally continued to decline, directly lowering the holding costs of gold and becoming a key driver of its price increase.
This logic was already validated in the author’s previous predictions. On September 3, it was hypothesized that if the 10-year U.S. Treasury yield fell from 4.0% to 3.5% by September 2025, and inflation expectations rose from 2.15% to 2.4%, real interest rates would drop from 1.85% to 1.1%, potentially driving gold prices up by 10%-20%. The current rise in gold prices from $3,500 to $4,000 falls precisely within this predicted range.
Even in the short term, events such as geopolitical conflicts and debt crises ultimately push gold prices back to the logic of real interest rates.Hedgin demand triggered by the Russia-Ukraine conflict and the Israel-Hamas conflict, combined with high U.S. debt (the federal government debt-to-GDP ratio reached 126.8% in 2024) and market anxiety caused by government shutdowns, will fundamentally drive up inflation expectations through disrupting supply chains and forcing monetary easing. Against a relatively stable nominal interest rate background, rising inflation expectations will inevitably lead to lower real interest rates, further driving gold prices up.
The sustained purchases by central banks around the world provide the gold market with the strongest “ballast.” This buying is not short-term speculation but a long-term strategic layout based on the transformation of the global monetary system, and its essence remains deeply tied to the core logic of declining real interest rates.
Data shows that central banks around the world have been net buyers of gold for 15 consecutive years, with their gold purchasing speed nearly doubling since the Russia-Ukraine conflict. According to the World Gold Council, central banks globally bought more than 1,000 tons of gold for the third consecutive year in 2024, with their holdings accounting for one-fifth of the world’s total mined gold. In the second quarter of 2025, even with gold prices at a high of $3,700, central banks worldwide still netted 1,660 tons of gold, demonstrating their commitment to allocation. What’s even more noteworthy is that 95% of the surveyed central banks expect global official gold reserves to increase in the next 12 months, and 76% plan to increase their holdings within five years.
Looking at the entities buying gold, emerging market central banks and geopolitically sensitive countries have become the core forces. Poland purchased 89.5 tons of gold in 2024, with gold accounting for nearly 20% of its foreign exchange reserves, and continues to increase its holdings in 2025. Besides the supply chain concerns brought by its proximity to Ukraine, the declining global real interest rates are a major driver. The People’s Bank of China has been increasing its gold holdings for 11 consecutive months, with its reserve reaching 740.6 million ounces by the end of September, continuously optimizing its reserve structure. The Reserve Bank of India is seen as a potential “key variable,” with its low gold reserves and inflationary pressures from U.S.-India trade tensions potentially prompting it to accelerate gold purchases.
Central banks’ strategic considerations also extend to storage. In 2025, 59% of the surveyed central banks stored their gold reserves domestically, a significant increase from 41% in 2024. China is also planning to become a custodian institution for foreign sovereign gold reserves, reinforcing the monetary attributes of gold to back the internationalization of the renminbi. This dual action of “increasing holdings + repatriation” is essentially a response to the decline in U.S. dollar credit — and low real interest rates are a direct manifestation of the U.S. dollar failing to keep pace with inflation and its weakened credit.
Central banks’ strategic layout has produced a strong Demonstration effect, prompting private sector entities to follow suit, creating a positive cycle of “central banks leading — institutions following — retail investors entering,” making the gold bull market increasingly irreversible.
At the institutional level, global gold ETFs have maintained strong demand for two consecutive quarters, with holdings increasing by 3.6 million ounces in September, a year-to-date increase of 17% and reaching the highest level since September 2022. Wall Street investment banks have Upregulated their expectations: Goldman Sachs raised its 2026 December gold price target from $4,300 to $4,900, citing the continued release of structural diversification demand from central banks in emerging markets; Citigroup is even more optimistic, predicting that if the Federal Reserve continues to cut rates in 2026, gold prices could challenge the $5,000 milestone.
This enthusiasm stems from gold’s unique value in the current market environment. As the world transitions from an era of growth to one of stagnation, coupled with long-term factors like deglobalization and supply chain restructuring, the hedging effect of traditional stock-bond portfolios has weakened, while gold has demonstrated strong hedging capabilities in scenarios of economic slowdown and policy uncertainty, known as “tail risks.” During the market crash on October 10, stocks, bonds, and cryptocurrencies all fell simultaneously, with gold being the only safe haven. This passive allocation effect in the “asset shortage” further reinforces its safe-haven attributes.
Looking at the longer term, gold’s monetary attributes are continuously “shining.” Since the collapse of the Bretton Woods system, gold’s cumulative price increase has exceeded 10,200%, significantly outperforming the U.S. Dollar Index and the S&P 500 Index. Even over the past 30 years, its 866.87% gain far surpasses that of commodities like oil and copper. Behind this is the growing awareness of the risks associated with the global reliance on the U.S. dollar — 73% of surveyed central banks believe the U.S. dollar’s share in reserves will decline over the next five years, making gold a core choice for hedging the dollar’s depreciation.
The current gold market has formed a self-reinforcing Closed loop: trade conflicts, geopolitical instability, and high debt levels are pushing up inflation expectations, while the Federal Reserve’s rate cuts are lowering nominal interest rates, both contributing to a sustained decline in real interest rates. Lower real interest rates weaken the dollar’s credit, prompting central banks around the world to accelerate gold purchases; central banks’ strategic holdings provide support for gold prices, attracting institutional and retail investors to follow suit; inflowing funds further push up gold prices, which in turn reinforces market confidence in gold allocation.
As long as core conflicts such as trade friction, geopolitical disputes, and debt expansion remain unresolved, the downward trend in real interest rates will be difficult to reverse, and this positive cycle will continue to strengthen. Historically, gold’s rise during periods of weakening dollar credit has often shown strong sustainability, while the current transformation of the global monetary system is just beginning.
Taleb’s judgment may reveal the essence: “People nominally trade in dollars, but they don’t store in dollars—that’s the problem.” When gold replaces the dollar as the globally more trusted “store of value,” the end of this bull market may no longer be determined by short-term fluctuations, but rather by when the new global monetary order forms. Until then, if no external force breaks the current closed loop, gold’s “invincible status” may continue to unfold.
