The "currency devaluation" trade makes a comeback, with gold prices rising over 5% this week to reach a three-month high

According to the APP from Zhihong Finance, expectations for a weaker US dollar are rising again as the US Treasury implements aggressive interventions in the bond market. Investors are turning to alternative assets, pushing gold prices to their highest level in over three months.

Spot gold rose as much as 1.2% during trading, breaking above $4,650 per ounce and reaching a new intraday high since mid-May. Last week, gold prices recorded their third consecutive weekly gain, rising by more than 5%. This came after the US Treasury unexpectedly announced an increase in long-term government bond repurchases, dragging yields and the dollar lower.

This move to directly intervene and control financing costs has raised market concerns that US policy may undermine confidence in the dollar and make other investment products more attractive—a sign of the return of the "currency devaluation" theme, which in 2025 drove a 65% surge in gold prices. A weaker dollar is positive for commodities priced in dollars.

"I believe macro funds are likely to shift substantially towards precious metals based on this currency devaluation narrative," said Justin Lin, analyst at Global X ETFs.

Even after Wednesday's unexpected announcement, US Treasury Secretary Scott Besant further stated that he is prepared to expand the scale of repurchasing high-cost debt and revealed the government will soon introduce a fiscal measure to cope with the highest borrowing costs in years.

Bloomberg-tracked gold ETFs saw inflows of more than 28 tons last week, the largest weekly increase since January—when a sharp rally pushed gold prices just below the record high of $5,600 per ounce. OCBC strategist Christopher Huang noted that these inflows show encouraging expansion in investor participation.

"This rally still has room to move higher, although some consolidation after the recent rapid increase would be healthier," Huang pointed out, adding that the main risk ahead is the potential for real yields or the dollar to rebound.

Further boosting confidence in gold, Bridgewater founder and billionaire Ray Dalio posted on LinkedIn last Friday, advising investors to reduce their bond holdings and allocate up to 15% of their funds to gold to hedge against US debt crisis risks.

As of publication, spot gold stands at $4,641 per ounce, up 0.8%, after recording a 1.9% gain on Friday. Silver is largely unchanged at $68.99 per ounce. The Bloomberg Dollar Spot Index, which measures dollar performance, steadied during the day after falling to a more than three-month low in the previous trading session.