U.S. stocks have recently pulled back sharply, prompting major financial media outlets to sound the “economic recession alarm” and triggering widespread market panic. But look beyond the fog of daily price movements, and it is clear that the fundamentals of the U.S. real economy have not deteriorated precipitously in the short term. At its core, this market sell-off is a quantitative liquidity stampede sparked by perfection priced in.

The key catalyst behind this bout of volatility in U.S. stocks is the profound weakening of the valuation logic underpinning the tech giants. For years, tech companies such as Microsoft, Google, and Meta have commanded exceptionally high valuations on the strength of growth narratives promising AI’s vast potential. But as earnings reports have come in and the industry hype has faded, the weaknesses in companies’ actual operating results have been laid bare.

Microsoft’s capital expenditures topped $10 billion in a single quarter, with the enormous investment directly consuming the company’s operating cash flow. Google’s AI business has yet to deliver stable commercial returns, and the timeline for generating profits remains distant. Meta’s growth also fell short of expectations, prompting analysts to raise discount rates and push back the overall earnings cycle. The fading growth premium of leading tech companies has severely undermined market confidence in valuations.

Meanwhile, the booming AI computing-power supply chain has also hit a structural bottleneck. Upstream chipmakers’ gross margins have now surged above 75%, capturing most of the industry’s profits, but growth in the sector has stalled. Downstream companies are unwilling to keep paying for undifferentiated AI features, and no truly must-have AI application has yet emerged for consumers.

The entire computing-power market has formed a fragile closed loop: cloud providers buy GPU equipment and lease it to AI startups; the startups rely on funding to stay afloat, and that funding ultimately flows back to cloud providers and upstream chipmakers. This model, entirely dependent on capital injections, has no resilience. If global credit conditions tighten, the entire supply chain could break down instantly—one of the key risks weighing on tech stock valuations.

However, there is no need for excessive panic. The foundations of U.S. tech giants remain intact: major companies hold hundreds of billions of dollars in cash reserves, and their core businesses retain strong competitive barriers. This sell-off was primarily an emotional, liquidity-driven decline triggered by mechanical liquidations from quantitative algorithms, not a collapse in fundamentals. Once disorderly liquidation flows have fully cleared, the market will eventually regain its composure and return to evaluating asset values based on free cash flow. Many high-quality tech assets that have been unfairly sold off should gradually return to reasonable valuations.

Gold market: Short-term volatility does not alter the long-term shift in value

While U.S. equities have been volatile, the gold market has faced a major bout of sentiment-driven turbulence: news that Kazakhstan’s central bank had reduced its gold holdings went viral. Many investors panicked, interpreting it as a sign that central banks were selling gold and the bull market was over. But a look at the complete data and underlying dynamics shows that these fears are greatly overblown.

According to public data from the World Gold Council, Kazakhstan was still the world’s fourth-largest gold buyer in the first eight months of this year. This move was not a complete exit, but merely a modest adjustment to the composition of its foreign exchange reserves: the plan is to reduce gold’s share from 78% to 75%. The total reduction amounts to just 12–14 tonnes.

In terms of the market’s capacity to absorb the sales, global gold trading averages nearly $90 billion a day. A reduction of just over a dozen tonnes can easily be absorbed by the spot market in a single day. Half of the amount being sold was also handled through options, so it will not directly affect the spot market. The actual selling pressure is negligible.

Kazakhstan’s gold sales are driven by strong domestic macroeconomic policy objectives, not by a bearish view of gold. For years, Kazakhstan has continued buying domestically produced gold, injecting large amounts of local currency into the market and building up significant domestic inflationary pressure. The reduction is intended, on the one hand, to allocate reserves to higher-yielding U.S. Treasury assets and boost returns; on the other, and more importantly, to tighten domestic liquidity, curb inflation, and stabilize the national currency. It is a classic tactical policy adjustment.

Moreover, Kazakhstan’s central bank has set a floor for gold’s share of its reserves, creating an implicit safeguard for the market: if international gold prices fall to $4,000, the share of gold reserves will automatically meet the target without the central bank needing to sell anything. This means $4,000 will serve as a strong psychological support level for international gold prices, effectively limiting the scope for a sharp decline.

Survey data from the World Gold Council also directly refute the rumor that central banks are exiting gold. The data show that 89% of central banks worldwide expect their gold reserves to continue growing over the next year, while 45% plan to actively increase their holdings—the highest proportion on record. Gold has now overtaken U.S. Treasury securities to become the world’s largest official reserve asset.

The key reason for the market’s intense panic is a mismatch between sentiment and expectations: before this latest reduction, Kazakhstan had increased its gold holdings for 42 consecutive months. Its first move to sell was magnified enormously by capital markets and the media, creating a shock far greater than the actual selling pressure warranted.

A deeper shift: The U.S. reshapes gold’s monetary pricing system

The long-term outlook for gold is being rewritten by new U.S. Treasury policies. A key bullish catalyst is the appointment of gold advocate Judy Shelton as an adviser to the U.S. Treasury. The two alternative monetary policy proposals she has put forward could reshape gold’s pricing logic for decades to come.

The first proposal is TTB gold option bonds: 50-year, zero-coupon U.S. Treasury bonds that let investors choose at maturity whether to receive cash in U.S. dollars or exchange the bonds for a fixed amount of gold. According to estimates by the Nomnes think tank, introducing this instrument could lower market interest rates by 50 basis points and help the U.S. save a massive $200 billion a year in interest costs.

The second proposal is more subtle and far-reaching: revaluing gold on the books. The 260 million ounces of official U.S. gold are still carried at the extraordinarily low price of $42.22 per ounce set in 1973. Federal Reserve economist Colin Wease argued as early as 2025 in a working paper that this measure was feasible: simply adjusting gold’s book value to reflect the real-time market price—without selling a single ounce—could add over a trillion dollars in fiscal headroom to the U.S. government’s balance sheet.

Although the proposal remains highly controversial within the industry and its near-term implementation is uncertain, Germany’s Kettner Bullion has stated unequivocally that this is the strongest signal in half a century, marking gold’s return from an ordinary commodity to a central position in the U.S. fiscal and monetary system.

Conclusion: A shift in the old and new pricing logic for gold

Taken together, the dynamics of the U.S. stock market and the gold market make the current asset landscape clear.

In the short term, gold is strongly supported around the $4,000 level by policy, sentiment, and supply-and-demand factors, making a steep decline highly unlikely. Market volatility is driven more by competing sentiment.

Over the long term, the core logic for valuing gold has undergone a complete transformation: it has moved from being a traditional “inflation hedge and safe-haven commodity” to a core global monetary asset. This fundamental shift will be the key driver of gold prices in the years ahead.

As U.S. equity liquidity recovers and gold’s monetary role is redefined, these competing forces may bring the market to an entirely new turning point.

Risk disclosure: This content summarizes the views of overseas analysts and macroeconomic market information for research purposes only. It does not constitute investment advice or recommend any products. Precious metals and stock markets are highly volatile. Investors should make their own independent assessments. Investing involves risk; exercise caution when entering the market.