Gold at Record Highs — Is a Crash Coming in 2026?

Gold's Recent Performance vs. Historical Context [00:00]

• Gold has hit record highs, with a 64% increase in 2025, significantly outperforming the S&P 500's 16% gain during the same period.
• While a one-year chart shows a steady rise, a 30-year perspective reveals a more dramatic and potentially "scary" surge, leading to questions about a potential crash.

The big question is, will this spectacular rise in the price of gold be followed by a crash?

The 1980 Gold Crash: Causes and Lessons [01:08]

• The most famous gold crash began in 1980, following a decade of rising prices driven by inflation, oil shocks, geopolitical turmoil, and declining confidence in the US dollar.
• Gold peaked around $850 a troy ounce in January 1980 and subsequently collapsed by 65%.
• The critical lesson from 1980 is that gold falls not simply due to being expensive, but when confidence in paper fiat currency is restored.
• This restoration of confidence was achieved by the Federal Reserve, under Paul Volcker, raising interest rates to approximately 20%, significantly higher than the rate of inflation, making holding cash profitable.
• This painful but effective policy led to recessions, increased unemployment, and a strengthening dollar, diminishing gold's role as monetary insurance.

Gold does not fall just because it's too expensive. No, gold falls when confidence in paper fiat currency is restored.

The 2011 Gold Peak and Subsequent Decline [06:29]

• Gold peaked around $1,920 a troy ounce in September 2011, following the global financial crisis and quantitative easing.
• It surged as a hedge against perceived risks, but expected high inflation did not materialize due to globalization, weak wage growth, and excess capacity.
• Around 2013, the Federal Reserve signaled the end of emergency policies, leading to higher real interest rates, a stronger dollar, and a risk-on market sentiment.
• Gold experienced a slow, grinding decline, falling roughly 45% by 2015, not because it was too expensive, but because its role as insurance became less necessary.

Gold did not fall because it became too expensive. No, gold fell because its insurance role was no longer necessary.

Conditions for Gold Crashes: A Three-Pronged Approach [08:04]

• Gold crashes historically occur when three conditions align:
  1. Real interest rates turn positive and remain so.
  2. The US dollar enters a sustained strengthening cycle.
  3. Confidence in monetary policy is restored.
• These factors are more significant than technical overbought signals; gold is driven by real yields and credibility.

Gold doesn't care about you technical overbought signals. So sure on a technical basis gold may be overbought but it's still underowned.

Today's Environment: A Divergence from the Past [08:48]

• The current environment is fundamentally different from 1980 or 2011:
  • Real interest rates are not positive; inflation (estimated at 6-8% using 1980s methodology) is higher than the Fed funds rate (3.75%), meaning real purchasing power continues to erode.
  • US debt has surged to over 120% of GDP, making it unmanageable for the government to raise interest rates significantly without crippling interest expenses.
  • Fiscal policy remains loose, with enormous deficits (e.g., $1.8 trillion for FY 2025), undermining currency confidence.
  • Central banks are buying gold at record levels, diversifying away from the US dollar, creating persistent baseline demand.
  • The US dollar lacks a clear long-term bull case as many countries are de-dollarizing.

Today's environment is fundamentally different. So people keep comparing today to 1980 or 2011, but when you look at the actual conditions, the comparisons break down very quickly.

Scenarios for Gold's Future [11:19]

• A true structural downturn in gold would require sustained positive real yields, long-term fiscal discipline, a strengthening dollar, central banks reducing gold holdings, and a political willingness to endure prolonged economic pain.
• Realistic downside scenarios for gold include:
  • Volatility and consolidation: The price moves sideways within a range for an extended period.
  • Sharp corrections within a bull market: Gold could fall 15% or more due to news events, but this would not resemble the deep crashes of 1980 (65%) or 2011 (45%).
• A bare market scenario, where gold is consistently down, would require policy changes incompatible with current debt levels and political realities.

Instead of asking will gold crash the better question to ask in my opinion is what kind of downside is realistic in this type of environments.

The Inherent Flaw of Fiat Currency [13:25]

• The financial system relies on fiat currency, which is not backed by anything, giving central banks and governments the power to print unlimited amounts.
• Historically, fiat currencies, like those in Weimar Germany, have returned to their "true value: worthless."

And then in the end, just like every fiat currency in the history of human civilization, fiat currency backed by nothing return to its true value worthless.

Final Thoughts on Gold's Trajectory [13:59]

• Gold does not fall simply because it reaches new highs; it falls when confidence in fiat currencies is restored through credible policy, real returns, and discipline.
• The differences between today's environment and the periods of gold's past collapses are significant, suggesting that history must be understood properly.

Gold falls when confidence in fiat currencies returns. And it's restored with credible policy, real returns, and discipline.