When “stagflation” meets “tech bubble,” how far is the golden opportunity?

The key takeaway is that gold has already retreated deeply from its intra-year highs and has moved into a phase of sideways consolidation. In a stage marked by low sentiment and ugly technicals, it is often the window where mid-term logic turns can quietly take shape. These two low-probability, high-impact tail variables—stagflation-like risks and tech stock bubble risks—will ultimately converge on the same result: a renewed weakening of dollar credibility, which could become the starting point for gold’s next opportunity.

In recent sessions, gold’s price action has basically stabilized and entered a period of range-bound volatility. It must be said objectively that the short-term technical setup has not yet released clear bullish signals. But this mismatch—“the logic is improving, while the signals are not yet clear”—is precisely the most typical feature of left-side positioning.

The current period is one that deserves close attention for gold. Going forward, keep a close watch on whether two low-probability, high-odds tail risks will start to materialize.

01 Tail Risk One:
Dark clouds of stagflation-like risks are gathering
【Low probability - high impact】As the US-Iran conflict escalates again, oil prices have remained elevated for a prolonged period since February this year. As of now, the Brent crude oil price’s average annual rate has risen by 26.2% year over year. If US-Iran contradictions remain hard to resolve and oil prices fail to fall back below $70 per barrel for a long time, inflation stickiness could gradually become more visible. In addition, it is necessary to be alert to the compounding of potential risks—extreme weather has clearly increased this year, impacting major global agricultural product production regions. Once energy prices and food prices rise at the same time, the risk of inflation expectations climbing will surge sharply, and the probability of a stagflation-like scenario (similar to 2021-2022) would also rise significantly.

But note one key premise: a stagflation-like scenario itself does not equal an immediate strengthening of gold. During 2021-2022, inflation was high, yet the Federal Reserve chose to suppress it at any cost—continuing to deliver aggressive rate hikes. Real interest rates quickly turned positive and rose sharply, putting pressure on gold instead.

Gold’s potential turning point is when the market begins to confirm that “the credibility of tightening policy is wavering”—inflation is high, but the Fed still takes no action; or even if inflation has not yet met targets, the central bank may be forced to slow down rate hikes or even pivot due to growth pressures. As of now, market-implied rate-hike expectations are still evolving quickly, which in itself shows that pricing has not stabilized.

A rigorous judgment would be: the tightening expectations behind gold’s earlier decline have already been partially released, but whether all risks have been fully cleared depends on whether the Fed’s tightening pace further exceeds expectations—this is a variable that needs continuous tracking.

02 Tail Risk Two:
A tech bubble—an unresolved double-edged sword
【Probability increasing - not yet at the threshold】The author does not believe that an AI bubble burst will be realized in the near term—whether from the stage of industrial development or the liquidity environment, it has not reached the point where it would be thoroughly punctured. But there are signs that the risk’s marginal probability is rising, and it is worth incorporating into observation early. Historical experience shows that when the US stock market undergoes gradual adjustments or enters a sideways phase, gold’s relative performance is usually stronger—reflecting the need for capital reallocation as risk appetite cools. Based on historical experience, if a tech bubble burst evolves into a liquidity-crisis-style violent deleveraging (similar to 2008 and March 2020), gold may fall in sync in the short term. Under margin pressure, institutions are forced to liquidate all tradable assets including gold to secure dollar liquidity. The window when gold truly turns stronger typically appears later in the phase of panic trading, after the market confirms signals that the central bank will step in on a large scale.

03 The shared destination:
A re-pricing of dollar credibility
Both risks point to the same outcome from a mid-term perspective—dollar re-weakening. The dollar index can still hold relatively high levels right now. On one hand, it benefits from the US’s ongoing leadership in AI technology that continues to attract global capital inflows, offsetting market concerns about US Treasury credit and fiscal sustainability. On the other hand, it is also supported by the Fed’s adept expectations management—hawkish chairman plus hawkish statements continuously transmitting tightening signals to the market.

A special reminder: this inference of “dollar weakness” is more of a mid-term judgment rather than a short-term certainty. If the Fed continues to deliver on and even reinforce hawkish statements soon, the dollar could further strengthen in the short term without being ruled out, which could occur simultaneously with near-term pressure on gold.

What truly supports the mid-term logic is the question of how much room the Fed actually still has to keep delivering large, sustained rate hikes under real constraints from political factors and the drag from potential downside risks in US equities. Once the market re-prices the gap between the “hawkish narrative” and “actual actions,” the dollar may weaken again in stages, and that would be the catalyst for gold’s next round of opportunity. $XAUUSD ‌