Treasury Buybacks Fuel Gold and Bitcoin Rally Amid Dollar Weakness

The U.S. Treasury's expanded long-term bond buybacks have fueled concern over dollar weakness, driving gold to surge 10% in August and Bitcoin to climb 12%. The debasement trade is gaining momentum as investors brace for rising government debt and wider fiscal deficits.

Bullish wagers on gold are becoming more diverse, with investors using outright call options, lower-cost call spreads, and exotic options to position for further gains. Even so, implied volatility in gold options remains below levels seen at the start of the year.

Institutional money is flowing into Bitcoin, with over $2 billion entering U.S.-listed spot Bitcoin ETFs since August 19. This has reinforced the view that Bitcoin's recent strength goes beyond a simple short squeeze and is tied to macro hedging demand against eroding dollar purchasing power.