Fears that central banks will ultimately resort to money printing to inflate away mounting debt remain the core driver of gold’s surge, though rising geopolitical risks are adding to its appeal.
Gold’s climb to a fresh record high is clear evidence that the so-called “great debasement trade” is back, according to Robin Brooks, senior economist at the Brookings Institution and former chief currency strategist at Goldman Sachs. His comments came as gold vaulted past $4,400 an ounce.
Writing on Substack, Brooks argues the rally has been fueled by the Federal Reserve’s latest rate cut and growing concerns about debt monetization — the prospect of central banks purchasing government bonds to help finance fiscal deficits. Gold is now up 68% in 2025, while silver, which is driven by many of the same forces, has surged 140% after also hitting a new record this week.
Geopolitical tensions have further strengthened gold’s safe-haven status, with recent flare-ups in Venezuela and Ukrainian attacks on Russian ports and shipping contributing to demand.
Brooks traces the breakout in precious metals to Chair Jerome Powell’s dovish Jackson Hole speech on Aug. 22, followed by the Fed’s 25-basis-point rate cut on Dec. 10. Commodity markets are now pricing in additional easing from the central bank.
Crucially, Brooks says the debasement trade extends beyond precious metals. Even currencies typically associated with low public debt — such as the Swedish krona and the Swiss franc — are beginning to move in tandem with gold and silver. In a chart comparing G10 currencies against the dollar alongside precious metals, he shows growing correlations across these assets.
He attributes the krona’s strength to the debasement narrative, noting that it has historically been a volatile currency with few safe-haven qualities. Brooks also cautions that the dollar’s apparent resilience masks broader weakness: while it looks strong against the fragile Japanese yen, it has softened against a wider basket of currencies.
Jeroen Blokland, economist and manager of the Blokland Smart Multi-Asset Fund, points to another factor supporting gold — the continued yen carry trade. Investors are still borrowing yen to fund positions in higher-risk assets, with precious metals among the most attractive destinations.
In a post on X, Blokland argues that last week’s rate hike by the Bank of Japan — lifting its policy rate to 0.75%, the highest since 1995 — has not been enough to halt the carry trade. With inflation likely to remain structurally elevated and the interest-rate gap between Japan and the U.S. still wide, incentives to borrow yen and buy higher-yielding assets persist.
Japanese 10-year government bond yields continue to rise sharply and have nearly doubled this year, reaching about 2.08%.
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