New Delhi, Sept. 3 -- In January, gold was beyond reach. Central banks were buying, investors anticipated US Federal Reserve rate cuts, and the metal briefly touched $5,600 an ounce. Then came the reversal.

The West Asia oil shock did not weaken the dollar, as gold bulls expected. It strengthened it. Higher energy prices revived inflation fears, lifted Treasury yields and created a scramble for dollars. Fed chair Kevin Warsh dashed hopes of imminent easing; three policymakers even dissented in favour of a rate increase. A crowded consensus trade became a rush for the exits. Gold fell more than 25%, slipping below $4,100.

Federal debt has crossed $40 trillion, annual interest costs exceed defence spending, and roughly $9 trillion of mark...