Gold prices surged to a three-month high on Monday, with spot prices rising as much as 0.8% to exceed $4,640 per troy ounce, amid growing investor concern over U.S. fiscal policy and its impact on the dollar and Treasury yields.
The rally extended a weekly gain of more than 5%, marking the third consecutive week of gains. The advance followed an unexpected announcement by the U.S. Treasury to significantly expand purchases of long-dated government bonds, which temporarily pushed Treasury yields lower and the U.S. dollar weaker. Analysts said the move raised questions about the government’s ability to manage debt costs and maintain confidence in the dollar, fueling the so-called 'debasement trade'—a shift into assets perceived as hedges against currency devaluation.
Bridgewater Associates founder Ray Dalio reinforced this view in a LinkedIn post on Friday, recommending investors reduce bond holdings and allocate up to 15% of portfolios to gold to hedge against a potential U.S. debt crisis. The metal’s price surge in 2025, which contributed to a 65% year-to-date gain, reflects this shift in sentiment.
Gold-backed exchange-traded funds tracked by Bloomberg recorded inflows of more than 28 tonnes last week, the highest weekly total since January. At that time, a rapid rally pushed gold prices to within striking distance of a record high near $5,600 per ounce. Analysts at Oversea-Chinese Banking Corp. noted the inflows signal broadening investor participation, though they cautioned that near-term risks include a rebound in real yields or the U.S. dollar.
U.S. Treasury Secretary Scott Bessent, responding to the bond-buyback expansion, indicated further increases are possible and announced plans for a forthcoming fiscal initiative aimed at addressing elevated borrowing costs—the highest in years. The policy uncertainty has intensified focus on alternative assets, with gold and cryptocurrencies cited as beneficiaries of a weaker dollar environment.
