Gold Reverts to Pre-August Levels as Bitcoin Remains Stable

Financial markets experienced significant turbulence in mid-August following a major monetary pivot announced by Scott Bessent, the US Treasury Department. The move led to substantial gains for several assets, including Bitcoin and gold. However, this upward trend was short-lived as the landscape has since changed.

The Treasury's announcement involved doubling the maximum size of liquidity-support buybacks for longer-dated government debt from $2 billion to $4 billion per operation. This decision came after the 30-year Treasury yield reached a 19-year high at 5.34% on August 18.

Gold and gold-related assets surged in response, reaching a local peak of $4,700 per ounce on August 25. Bitcoin also experienced a significant price increase, soaring to $81,500 last week. The two assets were considered safe havens by many investors, with their rise attributed to the 'debasement trade' narrative as the US dollar weakened.

However, the macro situation has since changed, and most of these gains have been erased. The new Federal Reserve Chairman, Kevin Warsh, spoke at Jackson Hole last Friday, delivering a hawkish speech that markets interpreted as a sign of upcoming rate hikes. This change in sentiment led to gold plummeting to $4,300 earlier today, wiping out its August gains and even dropping below its starting level.