Rising Treasury yields, a weakening dollar, and mounting U.S. debt are raising new questions about traditional conventional assets—and strengthening the case for gold.
This week, the U.S. dollar fell to one of its lowest levels since late May, the national debt surpassed $40 trillion, and the yield on the 30-year Treasury reached its highest level since 2007.
These three interconnected events are now raising questions about the long-term strength of Treasuries—assets that have traditionally been considered among the world’s safest.
As inflation remains above the Federal Reserve’s 2% target, bond purchasers are demanding higher interest rates, making the servicing of U.S. debt more expensive. And while the Treasury Department has attempted to ease the pressure by announcing a large buyback of its own bonds, the relief is proving short-lived: Treasury yields continue to climb, while the dollar remains under pressure.
The consequences of that pressure may directly affect Americans’ finances. Treasury yields help influence borrowing costs throughout the economy—higher yields can contribute to more expensive mortgages, loans, and corporate financing. Higher yields can also pressure stocks as companies face higher borrowing costs and buyers reassess how much they are willing to pay for shares. That relationship was especially visible last week when major stock indexes fell as Treasury yields resumed their climb.
The uncertainty is also helping renew demand for gold. Gold has gained roughly 10% since the beginning of August as geopolitical tensions, dollar weakness, and concerns about conventional reserve assets like U.S. Treasuries drive demand for gold around the world. As questions surrounding the dollar and U.S. government debt persist, physical gold could attract further demand from buyers looking to diversify beyond assets tied directly to the U.S. financial system.
