Gold is up more than 13% in August, putting it on track for its biggest monthly gain since 1999. The rally follows the US Treasury's move to at least double its purchases of long-term government debt, a step that has pushed down long-dated yields and weakened the dollar. Bitcoin has surged alongside gold on the same dollar-weakness trade.
Gold nears its best month since 1999
Gold gained 1.5% on Friday to about $4,585 a troy ounce, extending a monthly advance that has now passed 13%. That pace puts gold on track for its biggest monthly gain since 1999.
The rally traces back to the US Treasury's announcement that it would "at least double" its purchases of long-term government debt, a step Treasury secretary Scott Bessent unveiled on Wednesday. The move has slightly lowered yields on 30-year Treasury bonds, but it has also weakened the US dollar amid concerns over the currency's purchasing power. An index tracking the dollar against a basket of peers fell 0.8% on Wednesday and dropped a further 0.3% on Friday.
The debasement trade returns
Traders described the move as reviving the "debasement trade," in which investors buy assets they expect will hold up against a weakening dollar and other fiat currencies. One commodities trader said Bessent's intervention had "resulted in a strong boost to debasement-trade assets, particularly gold and bitcoin."
That trade had stalled earlier this year after the US launched its war on Iran, a shock that pushed up short-term Treasury yields and strengthened the dollar. But with rate-hike expectations now lower and the Treasury's bond-buying announcement layered on top, the trader said the market had been handed a favorable setup for debasement trades to resume.
Bitcoin rallies on the same dynamic
Bitcoin has moved in step with gold. The cryptocurrency jumped nearly 8% on Friday and is up 24% over the week to more than $78,000, its highest level since May, putting it on course for its best week in more than three years. Jefferies chief European economist Mohit Kumar said gold and cryptocurrencies had performed strongly since Bessent's announcement, adding that it supports the weaker-dollar view.
Source: Financial Times
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