The so-called great debasement trade is back on as gold sets fresh record, says this strategist

Core Insights - Gold has surged to a new record high of over $4,400 an ounce, reflecting the resurgence of the "great debasement trade" as noted by strategist Robin Brooks [1][2] - The increase in gold prices is attributed to the Federal Reserve's recent interest-rate reduction and concerns over debt monetization, which involves central banks purchasing government-issued bonds [2][3] Group 1: Gold and Precious Metals Performance - Gold has delivered a remarkable 68% return in 2025, while silver has seen an even more significant increase of 140%, both reaching new record highs [3] - Geopolitical tensions, particularly regarding Venezuela and recent Ukrainian attacks on Russian ports, have enhanced gold's appeal as a safe-haven asset [3][4] Group 2: Economic Factors Influencing Precious Metals - The breakout in gold prices was triggered by Federal Reserve Chair Jerome Powell's dovish remarks at Jackson Hole and a 25-basis-point easing on December 10 [4] - Commodity traders are anticipating further easing from the Federal Reserve, which is influencing market dynamics [4] Group 3: Currency Correlations - The debasement trade is not limited to precious metals; currencies from low-debt countries like the Swedish krona and Swiss franc are increasingly correlating with gold and silver prices [5][7] - The strength of the Swedish krona is seen as a result of the debasement trade, despite its historical volatility and lack of safe-haven characteristics [7] Group 4: Broader Market Implications - The rise in gold prices is partially linked to the ongoing carry trade in the Japanese yen, where investors short the yen to finance long positions in higher-risk assets, including precious metals [8]