Gold Price Surge: Experts See Debasement Trade Driving Bullion Rally

The global price of gold has surged by over 17% since July 17 due to a combination of factors. Market participants attribute the rally to the so-called 'debasement trade', as investors seek protection against expanding government debt and liquidity injections.

A key trigger for this trend is increased intervention in the US bond market, with the US Treasury stepping up liquidity-support bond buyback operations. This has eased market functioning but added pressure on Treasury yields, making non-interest-bearing assets like gold more appealing.

The US Treasury Secretary Scott Bessent's plans for a longer-term fiscal strategy have also intensified concerns over fiscal sustainability, as national debt levels approach $40 trillion. Geopolitical risks have resurfaced, with escalating tensions in the Middle East and rising crude oil prices above $90 per barrel reinforcing demand for safe-haven assets.

The gold rally has coincided with weakness in the US dollar, making gold more attractive for holders of other currencies. Central bank demand remains a critical pillar of support, with monetary authorities accumulating gold reserves to diversify away from traditional reserve assets and strengthen portfolio resilience.