Even after adjusting for inflation, gold has surpassed the frenzied high point of 45 years ago

As concerns about the U.S. economic outlook continue to rise, the scorching three-year bull market for gold has been sustained, with prices now exceeding the peak levels of 45 years ago during the frenzy, even after inflation adjustments, entering uncharted territory.

Spot gold has risen about 5% this month, hitting a historic high of $3,674 per ounce on Tuesday. In just 2025, gold prices have set over 30 nominal price records. This latest surge has even surpassed the inflation-adjusted peak of January 21, 1980, when the nominal price of gold was $850.

Considering decades of consumer price increases, the $850 in 1980 is equivalent to about $3,590 today. It is important to note that methods of inflation adjustment vary, and some estimates may calculate the 1980 level even lower. Regardless, the market generally believes that, after inflation adjustments, gold has firmly surpassed the levels of the 1980s, once again highlighting its status as an "ancient safe-haven asset" against inflation and currency depreciation.

So far this year, gold has risen nearly 40%, against the backdrop of U.S. President Trump's tax cuts, the expansion of the global trade war, and unprecedented attempts to influence the Federal Reserve. The sell-off of the dollar and U.S. long-term Treasury bonds underscores a declining preference for U.S. assets among investors and raises questions about whether U.S. Treasuries can continue to serve as a safe-haven asset.

In January 1980, when gold prices rose to $850, the U.S. was experiencing a currency collapse, soaring inflation, and economic recession. At that time, gold prices doubled in just two months, triggered by then-President Carter's freezing of Iranian assets due to the hostage crisis, which heightened the risks for foreign central banks holding dollar assets.

Unlike the "parabolic rise followed by a sharp decline" of 1980, the current gold price increase has shown significantly smaller fluctuations. Part of the reason is that today's market has greater liquidity, making it easier for investors to enter, while attracting a broader range of investors, compensating for the weakness in traditional demand.

Thanks to the surge in gold prices, the value of gold held in London vaults surpassed $1 trillion for the first time last month, while gold has also overtaken the euro to become the second-largest asset in global central bank reserves.

Bloomberg analysts' models show that, compared to historical levels, gold does appear overly expensive, but there is one key exception: compared to U.S. stocks, gold still seems cheap, and the market is willing to pay for this insurance. The analyst believes that if the U.S. stock market comes under pressure, gold prices could soar even further.

In fact, gold has not always been so hot and sought after. It was once undervalued by central banks in the 1990s and 2000s, making this resurgence quite remarkable. At that time, the Cold War ended, and the eurozone was established, ushering in a globalization era anchored by the dollar. As the stock market soared, many private investors also turned away from gold.

Now, many central banks are once again buying gold to diversify their foreign exchange reserves, reduce dependence on the dollar, and avoid U.S. sanctions against their adversaries. Since the outbreak of the Russia-Ukraine conflict and the freezing of Russian overseas assets, gold prices have nearly doubled. After Trump took office, significant purchases by institutional investors further propelled the rise in gold prices. Additionally, buying by the People's Bank of China and the resurgence of interest in gold ETFs have supported this rally In the past two weeks, gold prices have surged again, breaking through the nominal historical high set in April of this year, after fluctuating within a narrow range for several months. The latest round of breakthroughs comes as financial market investors widely bet that the Federal Reserve is about to start cutting interest rates in response to slowing employment and potential economic recession.

Historically, interest rate cuts tend to enhance the appeal of gold relative to interest-bearing assets like U.S. Treasuries, while also putting pressure on the dollar. As former President Trump unprecedentedly challenges the independence of the Federal Reserve, gold bulls are becoming increasingly vigilant: even with rising inflation risks, the Federal Reserve may be forced to cut rates significantly.

Trump's attacks on the Federal Reserve are igniting crisis bets among gold bulls. A similar situation occurred in the early 1970s when the dollar weakened, and then-President Nixon pressured the Federal Reserve to maintain low interest rates in the face of inflation risks, triggering a massive bull market in gold, which was further compounded by two oil crises, ultimately pushing gold prices to a high of $850.

Jim Rogers, co-founder of Quantum Fund, recalled his experience of buying gold in the early 1970s:

I have read enough to know that in that environment, gold and silver were ways to protect oneself. I could see what was happening in the world at that time: countries were accumulating massive debts, and they were all printing money like crazy, diluting the value of their currencies