Peel the red onions and slice them into thin rings.
In a large skillet, melt the butter over medium heat. Add the onions and cook slowly, stirring frequently, until they are softened and deeply caramelized (about 15-20 minutes).
Sprinkle the brown sugar and half of the chili powder over the onions, then stir to combine. Allow the sugar to melt and further caramelize the onions.
Add the balsamic vinegar and water, then season with salt and black pepper. Simmer the sauce over low heat for another 5 minutes, allowing it to thicken slightly and the flavors to meld.
Taste and adjust seasoning with more chili powder or salt as needed. Serve warm with meats, grilled vegetables, or cheeses.
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