When confidence in currencies, bonds, and the authorities that issue them declines, demand for decentralized finance rises. Against this backdrop, the success of gold and Bitcoin should come as no surprise. Let’s discuss this topic and outline a trading plan for XAU/USD.
The article covers the following subjects:
Major Takeaways
- Gold is rising along with Treasury yields.
- The debasement trade is fueling the XAUUSD rally.
- Gold hit record highs during periods of QE.
- Buying XAU/USD remains relevant, with targets at 5,000 and 5,200.
Monthly Fundamental Forecast for Gold
The precious metal is heading for its third consecutive weekly gain and has reached its highest level since May amid concerns about US fiscal and debt problems. The higher gold climbs, the more its performance resembles its stellar rally in 2025. Back then, XAU/USD rose alongside Treasury yields amid the “Sell America” trade triggered by Donald Trump’s tariffs.
This time, the return of the debasement trade is driving gold higher. When investors lose confidence in bonds, currencies, and the authorities that issue them, interest in decentralized finance increases. It is no surprise that cryptocurrencies are rising alongside XAU/USD. Gold-focused ETFs also recorded a 257,000-ounce inflow, the largest in a single day since April, signaling strong demand.
Gold Weekly Performance
Source: Bloomberg.
If anyone has reason for regret now, it is Russia. According to the central bank, its gold reserves fell by 1.6 million ounces from January through July to 73.2 million ounces. However, for some, selling bullion is a matter of survival.
Others continue to buy gold aggressively, finding new reasons to do so. These include US gross federal debt hitting $40 trillion and potential fiscal repression by the Treasury. In essence, such measures closely resemble QE: buying long-term bonds while issuing more short-term debt to keep the budget deficit at its current level.
According to Scott Bessent, the deficit increase is temporary. Revenue is falling due to tariff refunds, while spending is rising because of tax incentives for businesses and households. However, the White House has introduced new import tariffs to replace those the Supreme Court struck down. Therefore, revenue should be similar to 2025 levels. Support for businesses and households should accelerate economic growth, which would benefit the budget.
The problem is that the rally in 30-year Treasury yields is not driven solely by fiscal concerns. Other factors include geopolitical risks and competition from bonds issued by hyperscalers to finance AI spending. The Treasury cannot influence these factors. Therefore, attempts to control yields are little more than fiscal repression and are likely to fail.
In these conditions, investors are beginning to shift toward assets less dependent on government action. Gold and Bitcoin are becoming attractive investment options, especially amid developments that resemble QE. In the past, quantitative easing helped push gold to record highs.
Monthly Trading Plan for XAU/USD
In my view, history may repeat itself. Gold long positions opened at $4,160 and increased at $4,415 per ounce appear to be the right strategy. Consider building up XAU/USD long positions from time to time, with targets at 5,000 and 5,200.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAUUSD in real time mode
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