Rising Government Debt Extends Gold’s Appeal Beyond Fed Rate Cuts - Crux Investor

AI desk brief

Rising sovereign debt burdens are being framed as a new support for gold beyond Fed-cut expectations: French 30-year term premiums are at their highest since the early 2000s, the US fiscal 2026 deficit is estimated at US$2 trillion, and BIS says higher term premiums helped drive about 40% of the recent rise in US 10-year yields. The article argues this backdrop strengthens gold’s diversification appeal even as higher yields, a 2% stronger dollar in September, and a 25 bp Fed hike helped push gold down 8.5% to US$4,176/oz.

Despite the price pullback, demand remained resilient: global gold ETFs drew US$10 billion in September, while UK-listed gold ETFs took in 54 tonnes in Q3 versus 18 tonnes implied by the WGC model. On the supply side, global mine production rose 2% y/y to a record 966 tonnes in Q2 and 3% y/y to 1,867 tonnes in H1, with multiple miners reporting higher output and guidance upgrades on mill expansions and ramp-ups.