The 'Debasement Trade' Just Hit A Wall—And The Bond Market Knows Something Gold Bugs Don't
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The narrative sounded perfect: gold soaring past records, Bitcoin rallying, stocks climbing relentlessly—all signs that investors were fleeing the dollar in a panic over U.S. currency debasement. But if you check what’s actually happening in the bond and foreign exchange markets, that story falls apart fast.
While precious metals have indeed surged impressively this year—gold jumping 50%, with silver and platinum posting even more dramatic gains—the markets that matter most for debasement fears are telling a completely different story. And that disconnect reveals something crucial about what’s really driving today’s market moves.
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When the Bond Market Contradicts the Gold Rally
Here’s the problem with the debasement narrative: if investors truly believed the dollar was being debased through reckless fiscal policy and Federal Reserve rate cuts during persistent inflation, Treasury yields would be spiking and the dollar would be collapsing. Instead, the opposite is happening.
The benchmark 10-year Treasury yield fell to 3.93% on Oct. 17, its lowest level in over a year excluding the brief April tariff-induced turmoil, with the yield down nearly 60 basis points for the year, according to Reuters. Even the 30-year yield, which is far more sensitive to long-term inflation concerns, has fallen roughly 20 basis points in 2025
“Debasement would imply a move away from the dollar and U.S. Treasuries into assets such as gold, and there is very little evidence to back up these flows,” Jane Foley of Rabobank said.
The inflation-expectations market reinforces this point. The 10-year TIPS breakeven rate—essentially where bond investors see inflation a decade from now—dropped to 2.275% last week, the lowest since June. More tellingly, the 30-year TIPS breakeven rate hit 2.21%, its lowest level since May.
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The Dollar Isn’t Cooperating Either
While the dollar did experience its worst first-half performance on record in 2025, it has been remarkably stable since April, with the dollar index ending last week almost exactly at its six-month average. Over the past month, the dollar has actually outperformed its G10 currency peers significantly, Reuters said.
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