Gold and Bitcoin retreat as dollar reasserts dominance

Gold and Bitcoin ↗ 0.29% moved in rare lockstep through August as investors grew alarmed over the US national debt surpassing $40 trillion, reviving the so-called "debasement trade" — though a resurgent dollar has since pushed both assets into retreat.

The Debasement Trade Returns

The simultaneous rally saw gold climb above $4,600 per ounce while Bitcoin topped $80,000 for the first time since May, according to The National. Bitcoin's 90-day correlation with gold reached an all-time high during the period, The Block reported. The rally was triggered in part by Treasury Secretary Scott Bessent's surprise bond-buyback plan, which markets interpreted as a Band-Aid on the country's fiscal problems rather than a long-term fix, according to Business Insider.businessinsider+2

Tony Hallside of STP Partners in Dubai told The National that the simultaneous rise was "not coincidental," as investors used different assets to express concerns about money's purchasing power and government finances. Andreas Anthis of Mashreq Capital explained that when confidence in a currency's purchasing power erodes, scarce assets are repriced upward — gold's supply is limited by mine production while Bitcoin's is capped by design.thenationalnews+1

The backdrop is stark. The US gross national debt officially reached $40 trillion in August, according to the US Treasury, having doubled in just ten years. The New York Times reported that the US is on track to borrow more than $2 trillion this year alone, with soaring interest payments now making up about half of that borrowing.crfb+1

Pompliano's Dual-Asset Strategy

Venture capitalist Anthony Pompliano added fuel to the conversation on September 2, posting on X that "the best combination of assets for the next two decades will be Bitcoin and AI." His thesis: own Bitcoin to benefit from inflation and AI to benefit from growth. If the government attempts to devalue its debt through money printing, Pompliano argued, Bitcoin could eventually exceed $1 million due to its strictly limited supply. Bitwise Chief Investment Officer Matt Hougan endorsed the same "dual-stack" approach, urging investors to "stop debating and buy both assets simultaneously".logos-pres+2

Dollar Fights Back

The rally has since cooled. Gold has retreated to around $4,300 and Bitcoin has slipped below $77,000 as the dollar strengthened on expectations of a hawkish Federal Reserve. Fawad Razaqzada of Forex.com StoneX Group Inc. ↗ 1.29% said fears of further rate hikes are hitting risk appetite broadly, with the dollar reasserting itself as the safe-haven trade.indexbox

Talk of a dollar collapse was "overdone," according to Madhur Kakkar of Elevate Financial Services, who noted that investors positioned for such a collapse have been wrong for a decade. Still, the $40 trillion debt pile persists — and as Anthis cautioned, the debasement trade may not be dead.indexbox