Gold advances to three-month high as debasement trade returns

Gold prices reached a three-month high after the US Treasury intervened in the bond market, reigniting worries about a weaker US dollar, according to market reports. The precious metal surged as much as 0.8% to above US$4,640 an ounce, the highest level since mid-May. Investors flocked to alternative assets, pushing gold higher.

The Treasury's surprise increase in long-term debt buybacks, aimed at controlling borrowing costs, appeared to weaken confidence in the dollar and make other investments, like gold, more appealing. This "debasement" trade had previously fueled a 65% rally in gold in 2025. A weaker dollar benefits commodities priced in US currency.

Justin Lin, an analyst at Global X ETFs, noted the potential for macroeconomic shifts towards precious metals due to the currency debasement narrative. Treasury Secretary Scott Bessent further indicated readiness to expand debt buybacks and unveiled a fiscal initiative to tackle record borrowing costs.

Gold-backed exchange-traded funds saw inflows of over 28 tonnes last week, the highest since January, when gold reached a record high before falling just below US$5,600 an ounce. Strategist Christopher Wong from OCBC suggested the rally still has potential for growth, although a consolidation period may be beneficial.

Ray Dalio, founder of Bridgewater Associates, advised investors to reduce their bond holdings and allocate up to 15% of their portfolios to gold to hedge against potential US debt crisis risks. Gold prices were up 0.8% at US$4,639.64 an ounce in Singapore by 10:08 am on Friday, rising 1.9% for the day. Silver held steady at US$69.01 an ounce. The Bloomberg Dollar Spot Index, which measures the dollar's value, remained stable after a decline to its lowest level in over three months the previous session.