Gold up 3.1%, Bitcoin rallies as bond stress hits Asian stocks

Gold climbed 3.1% to $4,513 an ounce this week while Bitcoin rallied alongside, as persistent U.S. Treasury bond stress pushed Asian equities toward weekly losses.

"Historically, markets have pushed back when they believe fundamentals — like record debt level and historically large deficits — are on their side, and further interventions could become too costly to bear," Steven Zeng, a strategist at Deutsche Bank, said.

The 30-year Treasury yield climbed back to 5.25% while the 10-year hit 4.71%, after Treasury Secretary Scott Bessent's surprise intervention brought barely a day of relief. The Nikkei slipped 0.8%, bringing weekly losses to 4.4%, while MSCI's broadest index of Asia-Pacific shares outside Japan added 0.5%. Brent crude held near $93 a barrel, up more than 5% for the week, after the U.S. threatened "the toughest sanctions in history" on Iran.

The dollar index fell almost 0.9% for the week to 98.802, hitting a three-month trough, as investors questioned the purchasing power of a currency backed by a budget deficit above 6% of GDP with $1.2 trillion in annual interest charges. The next test comes when Nvidia reports earnings next week, with the AI trade facing a hurdle as tech giants borrow heavily to fund AI capex at higher yields.

Debasement Trade Gains Traction

"The dollar has come under renewed pressure, in part due to a resurgent 'debasement' narrative," said Jonas Goltermann, chief markets economist at Capital Economics. "While we continue to think such concerns are somewhat overblown, and that the economic backdrop overall will point to a stronger dollar over the coming months, continued surprises from U.S. policymakers may well matter more in the near term."

The euro was up 1.0% on the week at $1.1686, after touching a 14-week peak. The dollar fared better against the yen, holding at 159.07, as Japan's core consumer inflation accelerated in July, adding to the case for a September rate hike from the Bank of Japan. Markets are already priced for a quarter-point rise to 1.25%.

What's at Stake for Risk Assets

Higher yields lift debt costs globally just as tech giants are borrowing heavily to fund AI capital expenditure, raising the discount on corporate earnings and challenging stock valuations. Walmart showed what happens when high expectations are disappointed, sliding 9% on a sales miss. The entire AI trade faces a huge hurdle next week when Nvidia reports, with much riding on its outlook for infrastructure demand and data center revenue.

For Bitcoin, the macro backdrop of dollar debasement concerns and persistent bond market stress could support continued safe-haven inflows. If the bond stress escalates into a broader credit event, expect elevated cross-market volatility that could test both directions of the crypto market.

This article is for informational purposes only and does not constitute investment advice.