A year ago in Gold, Then and Now, I argued gold was starting to matter again—not as a dollar-destroying machine, but as a way to pass the risk of currency erosion to someone else. I said it wasn’t a reliable inflation hedge. It was insurance against policy mistakes. Back then, gold traded around $2,400. Today, late October 2025, it’s $4,050/oz—up nearly 70% in 12 months. The metal has pulled back from its September high, and that dip made me go back and ask: Is this a Western panic about collapsing welfare states or runaway debt?
No. Sure, U.S. debt is now $38 trillion, and the long-term math is ugly. But Western investors haven’t fled the dollar en masse. In fact, they’ve been net sellers of gold via ETFs like GLD (U.S.) and SGLD (Europe). Shares outstanding are lower now than right after Russia invaded Ukraine in 2022—despite prices being 50%+ higher. That surprised me. I expected retail FOMO. Instead, post-inflation rate hikes made bonds and cash look decent again. Why hold zero-yield gold when a 2-year Treasury pays 4%? (Though GLD has seen a tiny uptick in shares lately—maybe the West is finally waking up.)
Meanwhile, the real action has been in the East. Chinese and Japanese gold ETFs have gone parabolic—shares issued in Shanghai and Tokyo funds have surged over the past 18 months. Why? Low rates. Japan’s BOJ held policy near zero for years, letting the yen slide and pushing savers into gold as a currency hedge. China, battling deflation from its property bust and industrial glut, saw its entire yield curve collapse—bank deposits paid nothing, so people bought the metal. Eastern demand soaked up everything the West was unloading. This isn’t some grand revival of “gold fever” in the West—it’s savers in Asia reacting to a world where cash earns nothing and real rates are stuck in the mud.
So where does that leave us? The bull case still hinges on low real interest rates, not inflation. If the Fed keeps cutting—and it probably will, given debt dynamics—Western ETFs could flip from net sellers to net buyers in a market with few natural suppliers (miners won’t lock in prices with political risk rising). But watch Japan: the BOJ just hinted at a December hike to 0.75%. A stronger yen could cool Japanese demand fast. And while the Trump-Xi meeting last week delivered a trade truce (tariffs down, soybeans back on), there was no renminbi revaluation—so China’s gold bid stays intact for now. As Duke’s Campbell Harvey says: “You can’t hedge unexpected inflation with gold… but low interest rates? That’s the driver.” And right now, the world can’t afford much higher ones.
Bottom line: Gold isn’t screaming “system collapse.” It’s saying: “Real rates are too low, and someone has to hold the bag.” In the near term, the metal stays vulnerable — a BOJ hike could strengthen the yen and cool Japanese buying; a surprise renminbi revaluation (unlikely after last week’s Trump-Xi truce) would hit Chinese demand. But long-term? Most major economies can’t afford meaningfully higher rates with debt loads this extreme. Central banks know it. Markets know it. That’s why gold’s structural tailwind remains strong — not because the dollar is dying, but because zero-yield beats negative real returns. For now, the East is carrying the trade. The West may join soon.
