The Patience Premium
© 2025 Sarmaya Partners, LLC
October 22, 2025
Volatility is the price of staying invested in scarcity
Key points
- Every drawdown in gold’s modern history has resolved with new highs. The current 7% retracement is another instance of the market digesting gains rather than signaling exhaustion. We see this spike in volatility as a healthy reset, not a sign of weakness. It’s how long-term strength shows up and builds momentum.
- Deficits, not just interest rates, are driving liquidity creation. With Social Security, Medicare, and Net Interest absorbing more than half of all U.S. federal outlays, fiscal consolidation seems a politically impossible. This structural imbalance anchors gold’s long-term bid as policymakers rely increasingly on monetary and fiscal accommodation to finance spending.
- Central banks have become systematic gold buyers, treating it as a Tier 1 reserve asset amid rising geopolitical fragmentation and declining trust in fiat discipline. Their price-insensitive accumulation sets a structural floor beneath the market. For investors, the behavioral edge lies in patience, the capacity to stay invested through cyclical volatility in a secular uptrend.
Volatility is the price of staying invested in scarcity
Key points
- Every drawdown in gold’s modern history has resolved with new highs. The current 7% retracement is another instance of the market digesting gains rather than signaling exhaustion. We see this spike in volatility as a healthy reset, not a sign of weakness. It’s how long-term strength shows up and builds momentum.
- Deficits, not just interest rates, are driving liquidity creation. With Social Security, Medicare, and Net Interest absorbing more than half of all U.S. federal outlays, fiscal consolidation seems a politically impossible. This structural imbalance anchors gold’s long-term bid as policymakers rely increasingly on monetary and fiscal accommodation to finance spending.
- Central banks have become systematic gold buyers, treating it as a Tier 1 reserve asset amid rising geopolitical fragmentation and declining trust in fiat discipline. Their price-insensitive accumulation sets a structural floor beneath the market. For investors, the behavioral edge lies in patience, the capacity to stay invested through cyclical volatility in a secular uptrend.
What is this volatility?
Every pullback in gold’s modern history has been an invitation, not an obituary. The latest 7% retracement, following a vertical surge to $4,350/ounce, is the market catching its breath rather than losing its footing. In a world governed by fiscal dominance rather than monetary orthodoxy, volatility is simply the toll investors pay for owning scarcity.
Over the past decade, gold has endured ten drawdowns that exceeded 5% after reaching a new all-time high. Each one coincided with some form of policy tightening, liquidity stress, or crisis of confidence, and each one eventually led to new all-time highs.
On average, these episodes lasted roughly seven months from peak to trough and took another nine months to recover, rewarding patient investors with nearly an 18% rebound. Such volatility episodes have been noise, not a structural change.
Evidence that gold is repricing
Gold’s rise from $3,200/ounce in August 2025 to a record $4,350/ounce in October 2025 was the steepest rally since the post-pandemic surge of 2020. The subsequent pullback to roughly $4,030/ounce is not a breakdown but a repricing after a parabolic advance.
Similar pauses followed the 2015 rate-hike scare, the 2016 dollar rally, and the 2022 inflation panic, each lasting several weeks to a few months before the structural bid re-emerged. If history rhymes, this one will be no different. A period of sideways trading is a natural digestion phase as macro conditions catch up to price action.
A regime of fiscal dominance and geopolitical risks
The foundation of this bull market is fiscal and geopolitical risks. In this era of fiscal dominance, deficit spending drives liquidity and the economy more than monetary policy.
When governments borrow beyond the market’s capacity to absorb, the monetary system must accommodate.
The numbers speak for themselves. Social Security, Medicare, and Net Interest together consume more than half of all federal outlays. These are not discretionary levers that can be dialed back. They are obligations. The spending architecture is fixed, while revenue flexibility has collapsed. That is the essence of fiscal dominance.
Gold as a fiscal anchor
Gold benefits because it is no one’s liability. Since 2022, it has effectively been reclassified as a Tier-1 reserve asset by central banks seeking insulation from sanctions risk and dollar weaponization. These institutions are not traders chasing price; they are structural reallocators of reserves, and their steady accumulation sets a floor under gold driven by balance-sheet necessity rather than sentiment.
Geopolitics has become the new vector of monetary policy. The world’s reserve structure is fragmenting into regional blocs, trade settlements are being rewritten, and gold sits quietly at the center as the neutral settlement asset. The 1970s taught investors that inflation is only half the story; the other half is trust. Once the credibility of fiscal discipline erodes, markets instinctively seek an anchor that does not require faith in future promises. That anchor, once again, is gold.
Charlie Munger once said that “The big money is not in the buying or the selling, but in the waiting.” Warren Buffett offered a similar counsel when he said, “Look at market fluctuations as your friend, not your enemy; profit from folly rather than participate in it.” The data bears them out. Across every drawdown in our dataset, investors who simply held through the decline were positive within twelve months.
The average rebound from trough to new high was nearly 14%, a tangible reward for emotional endurance. Patience, in this context, is not virtue but alpha. The ability to tolerate short-term drawdowns in a secular uptrend is the behavioral equivalent of a call option on structural change. The premium one earns for that patience compounds quietly but powerfully over cycles.
Bottom line
The fundamental case remains intact. Runaway fiscal deficits, persistent inflationary pressure, and a new geopolitical architecture have elevated gold from a hedge to a core reserve asset. Central banks are systematic buyers now, indifferent to price and driven by strategic necessity. In this environment, corrections of 7-10% should be viewed as recalibration rather than exhaustion.
Something must adjust, and history suggests it will not be gold. The world is repricing trust itself, and in that process, gold continues to serve as the benchmark of permanence in an age of impermanence.
Volatility is not risk; it is the price of staying invested in scarcity.
Disclosures
The content herein is intended for informational and educational purposes only. The content presented herein should not be considered investment advice, the basis for investment decisions, or a source of legal, tax, or accounting guidance. Investment markets inherently carry risks, and investment outcomes may deviate from initial investments. This does not constitute an offer to sell or solicit the purchase of units or shares in any product.
Statements about companies, securities, or other financial information represent personal beliefs and viewpoints of Sarmaya Partners or the respective third party. They do not constitute endorsements or investment recommendations to buy, sell, or hold any security.
Some statements herein may express future expectations and forward-looking views based on Sarmaya Partners’ current assumptions. These statements may involve known and unknown risks and uncertainties, potentially leading to different results than those implied or expressed. All content is subject to change without notice.
