Gold, Bitcoin post strongest monthly gains of 2026 on dollar debasement fears

Gold and Bitcoin ↘ 0.86% posted their strongest monthly gains of the year in August as the U.S. Treasury's decision to expand long-dated bond buybacks revived the so-called debasement trade — a bet that scarce assets will outperform a weakening dollar amid ballooning government deficits.

Gold climbed roughly 10 percent in August, rising from near $4,000 at the start of the month to above $4,450 by month's end, according to Bloomberg. Bitcoin surged more than 12 percent from its August 19 breakout, briefly topping $80,000 before pulling back after Federal Reserve Chair Kevin Warsh delivered a hawkish keynote at the Jackson Hole symposium on Friday.bloomingbit+2

Treasury Buybacks Spark the Rally

The catalyst was Treasury Secretary Scott Bessent's mid-August announcement that the government would at least double its purchases of outstanding Treasuries with maturities of 10 to 30 years, raising the per-operation cap from $2 billion to at least $4 billion starting September 9. On the day of the announcement, Bitcoin rallied 8.7 percent in a matter of hours, climbing from roughly $64,100 to nearly $70,000, according to Forbes. More than $2.5 billion in short positions were liquidated in the Bitcoin perpetual futures market between August 19 and 21, accelerating the advance.forbes+2

The Wall Street Journal News Corp ↘ 0.52% noted that the debasement trade — where investors flee the dollar for gold, Bitcoin, and other alternative assets — was "making a comeback". Bloomberg reported that the dollar weakened while gold and Bitcoin rallied, "reinforcing a debasement trade narrative fueled by swelling US deficits". CNBC described the trade as "gaining new traction on Wall Street".cnbc+2

Emerging Markets Join the Trade

The rotation is extending beyond precious metals and crypto. Bloomberg reported on August 30 that emerging-market bonds are poised for further gains as the debasement trade amplifies inflows into the asset class. Fund managers at JPMorgan Asset Management ↘ 0.30%, Invesco ↘ 2.41%, and Marlborough Investment Management cited superior fiscal management in developing economies as a draw.economictimes+1

"We are very bullish for what the continuation of the dollar debasement trade means" for emerging-market bonds, said Swa Wu, head of Asia ex-Japan fixed-income investment specialists at JPMorgan Asset Management.economictimes

Warsh's Hawkish Turn Clouds the Outlook

The rally hit turbulence Friday after Warsh's Jackson Hole speech raised expectations for a September rate hike. Gold fell 3.2 percent on the week to close at $4,454.60, and Bitcoin slipped below $80,000. CME FedWatch data showed the probability of a September hike jumping from 35 percent to above 55 percent.ad-hoc-news+1

Yet analysts argue the pullback may be short-lived. Robin Brooks, a former chief economist at the Institute of International Finance, wrote that any September hike would be "performative," aimed at capping long-term yields rather than genuinely tightening financial conditions — a dynamic he called bullish for gold. Central banks purchased a net 288.9 tonnes of gold in the second quarter, a 62 percent jump from a year earlier and the strongest second-quarter reading on record, according to the World Gold Council.robinjbrooks.substack+1