A Golden Gap
At the end of last week, the price of gold took a spectacular tumble, dropping from $5,600 to $4,800 per ounce in just a few hours. Behind this sharp fall was the appointment of a new head of the US Federal Reserve, who we are told will not be as "flexible" as gold holders had hoped.
Which leads me to make a few observations.
In January 2026, the price of gold rose by 12.8% in a single month, which is good, and over the last 12 months, it has climbed by 80%, which is even better.
In technical terms, gold was therefore massively "overbought," a polite way of saying that many people had made a lot of money very quickly, often by borrowing dollars or yen, and that a sharp drop was therefore to be expected. We're right in the middle of it, and the question is: does the high reached by gold last Wednesday represent a high for this cycle, or is it just a pause to refresh the market?
To answer this question, I'll quickly review the tools I use to judge when to hold gold—or not.
First question: Does gold outperform cash in dollars? Let's find out.
(Continued on the UDE website or tomorrow on the Institut des Libertés website)