Gold and Silver Surge as the Debasement Trade Returns

Most people carry regrets—a poor decision, a miscalculation, or a missed opportunity that leaves them wondering what might have been. Mike Maharrey, host of the Money Metals Midweek Memo, recently shared one of his own. Around 2015 or 2016, he received one Bitcoin as payment for a service. At the time, Bitcoin traded at roughly $400, and he quickly sold most of it to buy a used laptop.

The point of the story is not to mourn a missed windfall. Regret can be a valuable teacher if it helps someone avoid repeating the same mistake. That lesson is particularly relevant for precious metals investors today.

Gold gained approximately 14.6 percent during the month, climbing from $4,045 per ounce on July 31 to more than $4,600. Silver moved even faster: after trading at $57.66 per ounce on July 31, it rose more than 20 percent and approached $70 as Maharrey recorded the episode. Both metals were trading near historic highs, a level few analysts anticipated at the start of the current bull market.

British Savers Regret Missing the Rally

A Royal Mint survey found that one-third of British adults regretted not investing in gold over the previous five years, while another 30 percent regretted missing silver's rise. Those regrets are understandable: gold gained nearly 50 percent over five years, and silver rose almost 200 percent.

Despite those gains, only 8 percent of UK adults held any savings in gold, and just 3 percent owned silver. This reluctance is common among Western investors. By contrast, demand from China, India, and other Asian markets helped propel the gold bull market while many Western investors stayed on the sidelines. In those markets, gold has long served traditional roles in savings, gifts, and cultural ceremonies, giving household demand a more persistent character than in Europe or North America.

The survey also found that 73 percent of respondents worried about how global conflicts and economic instability could affect the value of their money. Maharrey argued that the deeper threat is monetary debasement: governments benefit from creating and spending additional currency, even though the resulting inflation erodes the public's purchasing power over time—a dynamic that has repeated throughout monetary history, from ancient coin clipping to the modern printing press.

Regret Has Not Produced Action

Although many British adults recognized that gold and silver could have protected their savings, few planned to change course. Only one-quarter of respondents said they were likely to put money into precious metals over the next five years, while 60 percent still preferred to keep savings in a checking account.

That could set up another round of regret five years from now. Investors who missed gold near $1,800 five years ago—or at $4,045 on July 31—may eventually look back longingly at prices around $4,500 or $4,600.

Central banks in the United States and United Kingdom officially target 2 percent annual inflation. At that rate, money loses a little more than 10 percent of its purchasing power every five years. Policymakers are not trying to eliminate inflation entirely; they aim to keep it at a level they consider manageable.

For Maharrey, gold and silver should be viewed as part of a long-term strategy. Daily price swings matter less than the continuing decline in the purchasing power of fiat currencies.

Tuning Out the War-Driven Noise

Maharrey recently interviewed David Morgan, publisher of The Morgan Report, for the Friday Market Wrap podcast. A central theme of their conversation was the importance of tuning out short-term market noise.

The US-Iran war has caused real economic disruptions. Closures in the Strait of Hormuz have affected oil, energy supplies, and fertilizer flows. The strait is one of the world's most important chokepoints for seaborne oil trade, so even the threat of closure moves energy prices. Nevertheless, Maharrey characterized the war's influence on precious metals as a short-term distraction. Gold and silver have repeatedly rallied on news suggesting progress toward peace or a possible reopening of the strait—evidence, in his view, that bullish sentiment remains intact.

War headlines may be suppressing precious metals temporarily, but the forces supporting the longer-term bull market have not disappeared. Those forces include enormous government debt, economic distortions created by years of loose monetary policy, central-bank gold purchases, and the weaponization of the dollar.

Treasury Intervention Lasted One Day

The catalyst that may have cut through the war-related noise came from Treasury Secretary Scott Bessent. The Treasury announced it would double buybacks of securities in the 10-to-20-year and 20-to-30-year maturity sectors, from a maximum of $2 billion to $4 billion per operation. The goal was to support the bond market and lower borrowing costs at the long end of the yield curve.

Initially, the announcement worked. The 30-year Treasury yield closed at 5.31 percent on Tuesday, August 18, after touching an intraday high of 5.34 percent—the highest yield since 2007, the period immediately preceding the global financial crisis. Following the announcement, the yield fell to 5.19 percent at Wednesday's close, a decline of nearly 20 basis points. Two days later, however, it had rebounded to 5.27 percent.

Rather than demonstrating control over the bond market, the intervention may have signaled desperation. The dollar weakened while gold and Bitcoin rallied, suggesting investors interpreted the announcement as evidence of growing fiscal strain.

A Small Move Sent a Big Message

The planned increase from $2 billion to $4 billion per buyback is small compared with a Treasury market valued at approximately $35 trillion, but its psychological impact was much larger.

Precious metals analyst Brian Lundin called the announcement a "sign of desperation" and said investors saw "blood in the water." He also pointed to gold and silver breaking through important technical levels.

Bessent later suggested the Treasury could use as much as $1 trillion from its general account to support additional bond purchases and lower rates. Lundin argued such action would also prove temporary. The Treasury's effort to project strength exposed its weakness and encouraged mainstream investors to embrace the debasement trade.

What Is the Debasement Trade?

The debasement trade is an investment strategy centered on assets that may retain value as fiat currencies lose purchasing power. It commonly includes gold, silver, other commodities, and sometimes Bitcoin. Investors turn toward these assets when they grow concerned about debt, money creation, inflation, or the long-term value of paper currencies.

The US national debt recently surpassed $40 trillion. With policymakers showing little willingness to restrain borrowing or spending, foreign governments and investors have more reasons to question their exposure to Treasury securities and the dollar.

Central banks are already responding: many are reducing exposure to dollar-denominated assets while increasing their gold reserves. The weaponization of the dollar has accelerated this trend. The United States and its allies locked Russia out of the SWIFT financial system, froze Russian assets, and discussed using those assets to support Ukraine. Other governments have taken notice. Countries that fear similar treatment have an incentive to reduce their dependence on dollars and hold more politically neutral reserve assets, including gold.

AI Adds Competition for Capital

The artificial-intelligence boom is also complicating Washington's funding problem. AI companies and infrastructure projects are issuing debt to finance data centers, computing capacity, and expansion—borrowing that competes with Treasury securities for investor capital.

Whether the AI boom eventually resembles the dot-com bubble remains to be seen. For now, it is adding more debt to the market and increasing competition for a limited pool of buyers. Investors must decide whether to lend to companies they believe could generate substantial future profits or to a federal government already carrying more than $40 trillion in debt.

The Buybacks Have Not Begun

The expanded Treasury operations are scheduled to begin on September 9 and run through November 4. That means the initial market response occurred before the Treasury bought any bonds; investors reacted to what the announcement revealed about the government's financial position. The outcome of those operations, and whether long-term yields stay contained once purchases actually begin, is a key question for markets in the months ahead.

The Treasury also cannot create money. To purchase long-term bonds, it must raise cash by issuing more short-term Treasury bills and notes. The operation changes the maturity of the government's debt but does not eliminate it—the government is effectively borrowing new money to pay existing lenders.

Nathan Thooft, a senior portfolio manager at Manulife Investment Management, summarized the limitation: the Treasury can influence liquidity and sentiment, but it cannot sustainably override growth, inflation, deficits, and the supply of bonds.

Why the Federal Reserve May Intervene

Unlike the Treasury, the Federal Reserve can create money to purchase bonds. Through quantitative easing, the Fed buys securities and holds them on its balance sheet, removing bonds from the private market rather than merely replacing long-term debt with short-term debt.

Maharrey argued the Fed is already conducting small-scale operations that resemble quantitative easing, even if policymakers describe them as technical or liquidity measures. Newly created money enters the financial system and contributes to monetary inflation.

This creates a contradiction for the Fed. Higher interest rates may restrain inflation, but they also make the federal debt more expensive to finance. Lower rates and quantitative easing can reduce borrowing costs, but they risk producing more inflation and further weakening the dollar.

The United States is already spending more than $1 trillion annually to service its debt. As older securities mature and are refinanced at higher rates, that burden can grow. If the Treasury cannot contain long-term yields, pressure on the Fed will intensify. A more aggressive response could mean interest-rate cuts, larger bond purchases, and additional quantitative easing.

The Long-Term Case for Gold and Silver

Many analysts believe the United States may be entering a long-term bear market in bonds. The supply of government debt is extremely high, demand is weakening, and investors are demanding higher yields as compensation for inflation and fiscal risk. Government intervention can move markets temporarily, but it cannot indefinitely override excessive debt, persistent deficits, inflation, and declining confidence in the dollar.

Maharrey did not recommend abandoning every other asset for precious metals. He advocated a balanced portfolio that includes physical gold and silver as long-term monetary protection.

Short-term corrections remain possible. War headlines, interest-rate expectations, and shifting sentiment will continue to produce volatility. The longer-term trend, however, remains monetary debasement: federal debt is growing, borrowing costs are rising, central banks are diversifying away from dollars, and the Fed may ultimately respond with looser monetary policy.

Investors who focus only on tomorrow's gold price may miss the larger purpose of owning precious metals. Gold and silver are not merely vehicles for chasing a rally; they are tools for preserving purchasing power during periods of fiscal and monetary instability.

The episode's final lesson was simple. Missing an earlier opportunity does not mean every future opportunity is gone. Regret becomes useful when it leads to a better decision the next time.

About the Author

Money Metals Exchange is an online bullion dealer in business since 2010 and has been voted the Best Overall Precious Metals Dealer by Investopedia. Their website is MoneyMetals.com.

Source: GoldSeek