The Treasury Department’s announcement led to major gains for several assets. Gold, though, has lost its own.
Financial markets experienced enhanced turbulence in the middle of August after the US Treasury Department’s Scott Bessent announced a major monetary pivot.
Bitcoin and gold were among the most significant beneficiaries, posting substantial gains in the first few days. However, the landscape has since changed, especially for the precious metal.
What Happened?
On August 19, the US Treasury Department said it will at least be doubling the maximum size of liquidity-support buybacks for longer-dated government debt, raising them from $2 billion to $4 billion per operation. This came after the bond market’s notable rise to a 19-year high, as the 30-year Treasury yield touched 5.34% the day before.
The impact on financial markets was immediate. The same 30-year Treasury yield corrected to 5.2%, while gold, stocks, and crypto rocketed. The precious metal went from $4,360/oz to $4,530/oz in hours. It kept surging in the following days and skyrocketed to $4,700 per ounce on August 25, which became its highest price tag in over three months.
Bitcoin also reached a similar local peak, but its rally was even more impressive. The cryptocurrency struggled below $65,000 for weeks before it exploded to $81,500 last week.
The two assets, considered safe havens by many investors, were at the forefront of financial gains. Moreover, analysts began commenting that their spectacular rise was due to the ‘debasement trade’ narrative as the greenback weakened while the US debt kept growing.
Gold Down, BTC Stable
The macro situation has since changed, and most of the aforementioned price movements have returned to their starting point. Perhaps the most significant change came last Friday, when the new Federal Reserve Chairman, Kevin Warsh, spoke at Jackson Hole. Although he didn’t say it directly, his speech was quite hawkish, and markets interpreted it as a sign of upcoming rate hikes.
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BTC slipped by a few grand to $77,000, while the US bond market reclaimed almost all of its lost value. Gold, on the other hand, was rejected at $4,700 and plunged to $4,300 earlier today. This meant that it not only gave up all its gains but also dropped below its starting level, as it is down by over 8.5% from the local peak.
Although bitcoin has fallen from $81,000, it remains 20% higher than $64,000, where its run began. However, there are a few cracks now, which could suggest that its price might follow the bullion. Aside from the macro perspective returning to unfavorable for risk-on assets, the spot BTC ETFs have experienced more withdrawals than inflows in the past couple of business days as the initial rush is over.
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