Budget deficits – Japan’s prime minister, Sanae Takaichi, stated plans to expand fiscal stimulus ahead of a snap election. For a country with a debt-to-GDP ratio of over 230%, this fueled the debasement trade on another top-tier economy, igniting a sell-off in Japanese government bonds. When bonds are sold, yields go up, which can prove dangerous for the Yen, as its currency depended on the carry trade and ultra-low rates to sustain its debt pile.
Davos & Trump – Global heavyweights assembled at the annual World Economic Forum in Davos, amid shifting global power and trade dynamics. Although the conference was intended for collaborative dialogue around AI, growth and innovation, it quickly became politically contentious. U.S. President Donald Trump’s remarks on acquiring Greenland and further trade policy threats, drew pushback from European leaders and highlighted strains in traditional alliances.
Technological Revolution – Despite the spats and destructive actions of policymakers, the world’s technology stack continues to rapidly improve. Since the release of LLM’s (AI), private sector entities are building disruptive technologies which drastically improve the efficiency and productivity of existing industries – creating more goods and services at decreasing cost profiles. ARK Invest released a report called Big Ideas 2026, in which the investment firm lists five major platforms driving the future: AI, public blockchains, robotics, energy storage and multiomics.
Source: ARK Investment Management LLC
Institutional Buying – The world’s biggest government, and even non-governmental institutions, continue piling into gold. The People’s Bank of China has been on a buying streak, adding to its gold holdings for a 14th consecutive month in December. Meanwhile, Poland’s central bank, which is the number one for reported purchases of gold, approved plans in January to buy another 150 tons as it braces for more geopolitical instability. Tether, owner of the world’s largest dollar stable coin, made public that it’s been buying almost a ton of gold per week, and stores over $12 billion in gold bars in its own vault in Switzerland.
SA Inflation & Own Goals: SA’s headline inflation rate (includes energy, food costs) for 2025 came in at +3.5% y-o-y – within the SARB’s new target range. Analysts have welcomed the low reading, pointing to a firmer rand and softer fuel prices, but some pundits have argued that inflation is being held down largely by weak aggregate demand in an economy reflecting economic fragility rather than strength.
Gold crossed the $5,000/oz mark and then some, reaching a new record high of $5,593/oz today.
Daniel Ghali, a senior commodity strategist at TD Securities, wrote in a note: “Gold’s rally is about trust. For now, trust has bent but hasn’t broken. If it breaks, momentum will persist for longer.” Essentially, massive fiscal deficits, and the continued expectation of excessive fiscal spending and debt increases by America and Europe, powers the exodus from major currencies and bonds. This trade, dubbed the Debasement Trade, has continued to spur gold demand, trading speculation and momentum in the price.
Source: TradingView – DXY Dollar Index (5 days)
Gold’s rise is even trending on Polymarket – the world’s largest prediction market. Bets for gold price action shows some serious mainstream attention and momentum.
On the downside, the momentum rally in gold can likely be halted if trade relations de-escalate, especially U.S tariff threats, a real peace deal between Russia and Ukraine materialises, and if trust in the U.S Dollar is restored with resulting strengthening.
Without fundamental turnarounds in fiscal spending by America and other major governments, an outlook shift on Dollar debasement remains unlikely.
The yellow metal was last seen trading at $5,518/oz.
