The so-called “debasement trade” that sent gold, silver and bitcoin soaring in August has stalled as September trading begins, with all three assets pulling back and the dollar strengthening.
Throughout August, investors piled into hard assets amid growing anxiety that governments are debasing their currencies to cover mounting debt and deficits. Gold surged 6% to a three-month high near $4,500 per ounce. Silver jumped almost 9% to nearly $70 per ounce. Bitcoin rocketed 20%, reclaiming $80,000 for the first time in more than a year. The US Dollar Index, meanwhile, slipped 0.2%.
Billionaire investor John Arnold summed up the mood on X: “Markets are saying something.”
That mood shifted quickly. As traders returned from summer vacations at the start of September, gold slumped more than 2%, silver erased 3%, bitcoin tumbled 2%, and the dollar rose 0.3%. Yet yields across the Treasury curve kept climbing even as the hard-asset rally cooled.
Yields Under Pressure
The benchmark ten-year Treasury yield hit its highest level since January 2025, while the 30-year yield reached levels not seen since the Global Financial Crisis. The two-year yield, which tracks Federal Reserve policy expectations, is now factoring in two interest rate hikes.
The causes are debated: inflation anxiety, worry over federal fiscal health, artificial intelligence’s effect on interest rates, or simply thin summer trading volumes. Whatever the mix of reasons, Treasury Secretary Scott Bessent moved to calm the volatility by doubling debt buybacks from $2 billion to at least $4 billion beginning Sept. 9.
The United States is not alone. The United Kingdom, Germany and Japan have all seen borrowing costs climb sharply, with similar dynamics potentially at play in their gilt and bund markets.
A More Hawkish Fed
The early-September reversal in gold, silver and bitcoin coincides with investors pricing in a tougher stance from the Federal Reserve. CME FedWatch data show traders now assign roughly a 60% chance of a quarter-point rate hike at the September Federal Open Market Committee meeting.
Expectations have swung wildly since the July meeting, when investors first predicted a hike, then shifted to expecting a pause, then split evenly, and have now come back around to betting on an increase.
Two upcoming reports will shape what happens next. A soft August jobs report would likely push the Fed to hold rates steady. If the August Consumer Price Index shows headline and core inflation holding steady or slowing over 12 months, that would also buy the central bank more room before raising rates.
The Bigger Picture
Global debt now exceeds $200 trillion, and interest payments have become one of the largest line items in government budgets worldwide. Since the Federal Reserve’s founding more than a century ago, Americans have lost the vast majority of their currency’s purchasing power.
That backdrop is why institutional and retail investors alike have been accumulating tangible assets — stocks, precious metals, real estate, and digital currencies such as bitcoin and ether — regardless of short-term swings. As one emerging market mantra puts it: own assets or risk being left behind.
For now, markets remain what former Fed Chair Jerome Powell used to call “data-dependent,” with the jobs report and inflation numbers set to determine whether the debasement trade resumes or the early-September reversal holds.
