The Debasement Trade: Asset Revaluation in an Era of Fiscal Dominance

The “debasement trade” has become a defining narrative of this macro cycle, but its essence runs deeper than inflation or currency erosion. What is unfolding today is a structural revaluation of tangible and scarce assets as markets adjust to the realities of fiscal dominance, policy constraint, and declining monetary credibility.

For the first time in decades, investors are confronting a policy landscape in which monetary easing and fiscal expansion are pulling in the same direction. The first rate cut in September came while deficits remained deeply expansionary, and inflation expectations have stabilised at levels inconsistent with long-term price stability. Debt servicing already consumes a record share of government spending, and the political willingness to impose austerity is effectively non-existent.

This combination has created a structural constraint where monetary authorities are now effectively bound by the state's massive fiscal position. The central bank retains the power to adjust interest rates, but the underlying sovereign debt burden is immutable. The result is a slow but profound repricing of value. Scarce assets, hard commodities, digital monetary alternatives, and other non-sovereign instruments, are being revalued against the expanding supply of fiat liquidity

Gold and silver: fiscal pressure reflected in tangible assets

That adjustment is visible across the precious-metal complex. In October, Gold crossed the $4,000 mark for the first time, cementing its position as one of the best performing assets of 2025 and outpacing equities, bonds, currencies and Bitcoin. Similarly silver broke above $50, in the process completing a multi-decade technical pattern dating back to 1980.

Figure 1: Silver breaks $50, breaches cup & handle neckline

Silver’s breakout above the 1980 neckline underscores how fiscal and monetary imbalances are feeding into a structural revaluation of tangible assets rather than a short-term speculative surge.

At the same time, in inflation-adjusted terms, silver remains well below its previous highs, which highlights how the rally is as much about the denominator as it is about the metal itself. This is less a parabolic upswing than a repricing of monetary anchors to reflect fiscal reality.

Central bank accumulation and the global signal

While countless social media posts showing large swathes of people across different continents descending on bullion shops could be viewed as a sign of an overhating market, it's important to note that retail demand for bullion has been consistently strong for some time.

For example, last year we noted that posted that Costco, as well as specialist bullion dealers, were unable to keep up with inventory due to a surge in demand since the inflationary spikes resulting from the Covid-era liquidity injections.

But this retail demand is just mirroring what is the primary driver of the current bull run in gold: Central bank demand. China is clearly leading the way here, with the PBoC just reporting its 11th consecutive monthly gold purchase, adding 1.2 tonnes in September (and pushing the Q3 total to 5 tonnes), according to the World Gold Council. However, central banks more broadly have been net buyers of gold for several years.

Figure 2: Central Bank gold purchases (2010–2024)

Source: World Gold Council, MetalsFocus, Refinitiv/GFMS

Therefore, while retail enthusiasm appears an obvious symptom of a 'speculative trade', it is being driven by steady and deliberate institutional accumulation. It may be too early to tell, but if the current surge in gold and silver prices legitimately signals the beginnings of a loss of confidence in the system, it may not be instructive to dismiss this price discovery as merely a 'bubble' in the traditional sense but a a gradual shift in confidence from financial to tangible assets.

The distortion in traditional valuation metrics

Other data points provide additional insights on the current repricing dynamic. For example, the Dow/Gold ratio, which is the number of ounces of gold required to buy one share of the Dow Jones Industrial Average, has fallen back to levels last seen in March 2014, thereby erasing more than a decade of relative performance.

Figure 3: Dow priced in gold is back to March 2014 levels

Equity valuations appear elevated in nominal terms, yet the Dow/Gold ratio shows that much of that performance is a reflection of currency debasement rather than genuine wealth creation.

This gap between nominal returns and real purchasing power exposes the illusion creaby sustained monetary expansion. For those old enough to remember, this 'wealth effect' was popularised in 2009 by then Fed Chair Ben Bernanke, who oversaw the Federal response to the Global Financial Crisis (GFC) before infamously embarking down the path of Quantitative Easing programmes.

Rising asset prices can coexist with stagnant or falling real value, a dynamic that encourages capital to migrate toward assets defined by durability rather than financial engineering. In this sense, gold’s current rally is less an anomaly and more a barometer of re-pricing across the entire store-of-value spectrum.

Bitcoin’s emerging role in the revaluation

One of the hallmarks of the current macro market picture is the curious case of gold, silver, equities, and Bitcoin all setting record highs at the same time as long-dated government bonds yields. These assets are often negatively correlated with each other; for example, gold is typically negatively correlated with long-dated bond yields.

However, seen in the context of the current fiscal dominance due to war, it isn't curious at all. All assets are signalling the same story from a different angle, namely safe-haven demand fuelled by inflation and debasement concerns coupled with future expectations of lower interest rates due to economic deceleration. Here, unsustainable government spending and high debt loads serve as a common denominator between them all.

Figure 4: Gold, Silver, Bonds, and Bitcoin performance in 2025

Bitcoin’s rally alongside gold, silver, and long-dated bonds highlights a shared market response to fiscal imbalance and falling real yields.

Bitcoin is now increasingly part of that same conversation. Once treated as a purely speculative asset, it is gradually being re-evaluated through the same lens as traditional monetary assets. Deutsche Bank recently projected that Bitcoin could appear on central bank balance sheets alongside gold by 2030, a scenario that would have seemed implausible only a few years ago.

So while gold retains its legacy role as the anchor of trust, Bitcoin represents the digital evolution of that function. Together, they reflect a widening recognition that the foundations of monetary credibility are shifting.

The quiet reordering of value

The phrase “debasement trade” oversimplifies what is in reality a deliberate repricing of monetary assets in response to structural fiscal and policy trends. Across markets, capital is being repositioned toward stores of value that can operate independently of expanding sovereign balance sheets.

The rise in gold, silver, and Bitcoin reflects that repricing in different forms, each serving as a measure of the same underlying adjustment. Rather than a flight from the monetary system, it is a reflection of its evolution, an incremental shift toward assets capable of retaining credibility in an era where fiscal conditions increasingly set the boundaries of monetary policy.

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