After a months-long correction that saw a 30% pullback from record highs, the gold market has regained strong momentum. Gold prices began the new week with a push towards $4,700 per ounce, currently trading at their highest level in 15 weeks. Analysts attribute this renewed bullish sentiment to the resurgence of devaluation trades following the U.S. Treasury's announcement of purchases of long-term bonds to lower financing costs.

US debt surpasses $40 trillion, reigniting fiscal concerns among investors.

Bart Melek, head of commodity strategy at TD Securities, said in a report last Friday (August 21) that after the total U.S. national debt surpassed the $40 trillion mark last week, investor concerns about the U.S. fiscal situation intensified again, causing gold and silver prices to surge. Melek stated, "Based on the Treasury's statements, market participants believe that government intervention in the bond market may become more aggressive. At this stage, gold is likely to continue to react to a weaker dollar." As of now, Treasury Secretary Scott Bessent's planned bond repurchase operations have had a limited impact on the long end of the yield curve, with the 30-year Treasury yield hovering around 5.23% and the 10-year yield around 4.70%. According to reports, the Treasury can use nearly $1 trillion in its general account to finance its bond-buying program.

Inflation concerns remain, and the threshold for raising interest rates is not high.

Despite TD Securities' overall bullish outlook on gold in this environment, Melek cautioned that the precious metal still faces some potential headwinds: rising energy prices are continuously fueling inflation concerns in the market. He added that the threshold for a Federal Reserve rate hike remains low. Melek stated, "With crack spreads surging alongside oil prices, coupled with the continued oil shock pushing up inflation expectations, the possibility of a Fed rate hike remains. It's too early to talk about our target price of $5,350 per ounce."

Depreciation trading may become a structural theme, with retail investors showing signs of FOMO.

In another report released last Friday (August 21), Nicky Shiels, Head of Research and Metals Strategy at MKS PAMP, stated that if last year's market conditions are used as a reference, devaluation trading has significant potential for gold. She believes this sentiment is increasingly evolving into a structural theme that could push retail investors into a full-blown FOMO (fear of missing out) bubble. Shiels added that while gold has further upside momentum, tactically speaking, gold prices may have already overshot. She also pointed out that the threshold for interest rate hikes remains low. However, Shiels believes that despite the risk of rising interest rates, gold can still deliver outstanding performance because it remains the purest devaluation hedge and the purest hedge against US political intervention. Hills stated, "One institution is inclined to tighten, while the other is inclined to loosen, but both are targeting the same yield curve. Although the threshold for a Fed rate hike is low, Brent crude approaching $94 per barrel, tight diesel and refined product markets, and widening crack spreads constitute independent drivers of inflation expectations. Even if the Treasury successfully suppresses nominal yields, expectations of declining real yields are rising. This is a new gold tailwind driven by inflation, outside of the devaluation narrative."

Conclusion: The resurgence of devaluation trading

JPMorgan's commodity analysts have described last year's gold rally as a "devaluation trade." It was the widespread and diversified de-dollarization globally in the second half of 2025 that propelled gold prices to a record high of $5,600 per ounce in January of this year. Now, against the backdrop of a high US fiscal deficit, direct intervention in the bond market by the Treasury, and rising inflation expectations driven by energy prices, this trend of devaluation trading is making a comeback. Whether gold can capitalize on this momentum to rewrite records remains to be seen, depending on the ultimate outcome of the Federal Reserve's policy and the struggle between inflation and gold. Spot gold daily chart source: FX678. As of 12:09 PM Beijing time on August 25th, spot gold was trading at $4636.10 per ounce.