Gold prices have surged since the start of 2025, breaking the $4,300 mark in October. At the same time, bitcoin has rallied alongside precious metals. Against this backdrop, the U.S. dollar has weakened by 9% versus a basket of global currencies (FactSet, ICE US Dollar Price, October 20, 2025). Now Wall Street, as it often does, has coined a new investment phrase: the “debasement trade.” While historically used to describe devaluing silver or gold currency, today debasement refers to the declining U.S. dollar and its central role in the global economy. The debasement trade implies a shift away from the dollar and U.S. Treasury bills and toward precious metals like gold.

What is debasement?

The term “debasement” dates from ancient times when kings and rulers would reduce the content of silver or gold in coins to promote economic activity. One of history’s most notorious examples was Henry VIII’s Great Debasement of 1544 to 1551, when the English crown reduced silver content in coins with copper to finance its military campaigns. The act of diluting coins allowed monarchs to artificially inflate the money supply and fund government spending. Our modern economy has moved away from coins to dollars and Treasury bills as the epicenter of the U.S. financial system. The modern equivalent of clipping coins is central bankers and Treasury officials inflating the money supply—the circulation of cash and cash-like securities—through money printing and expansive fiscal policy.

Why now?

A growing federal budget deficit, the apparent shift in foreign policy priorities, and the implementation of tariffs as a central policy tool have created uncertainty about America’s fiscal trajectory. The dollar’s 9% decline year to date, coupled with gold’s 65% surge over the past year and bitcoin’s 16% rally, has given the debasement narrative mainstream credibility (FactSet, ICE US Dollar Price and LBMA Gold Price per Ounce, October 20, 2025; YCharts, Bitcoin US Dollar Price, October 20, 2025). Against this background, stocks have continued to soar, shrugging off the March and April tariff volatility to set new all-time highs.

In modern times, anxiety about dollar debasement is nothing new. After the 2008 financial crisis, the introduction of a zero-interest-rate policy and quantitative easing caused many pundits to predict the dollar’s demise. During the recovery from the COVID-19 pandemic, many once again worried about the dollar. The Federal Reserve dusted off the 2008 playbook of quantitative easing, and the government stepped in with a massive fiscal stimulus. Once again, the economy recovered and the dollar eventually rose.

This time feels different

Several factors make this moment feel distinct. Central banks, particularly in emerging markets, have been accumulating gold at the fastest pace in decades, pushing the price of gold past $4,300 an ounce, according to the World Gold Council. Furthermore, foreign holdings of U.S. Treasuries have declined as a percentage of total U.S. debt. The fiscal trajectory shows no signs of improvement regardless of which party controls Washington, yet several factors suggest the dollar’s role may remain intact:

  • No viable alternative at scale. The eurozone lacks fiscal integration, and the yuan remains nonconvertible with capital controls. No other currency market offers the depth, liquidity, and legal framework of U.S. capital markets.
  • Economic growth differentials. The U.S. economy continues to outperform most developed markets. Innovation, productivity gains from AI implementation, and favorable demographics relative to Europe and Asia support long-term dollar demand.
  • Tariff revenue and fiscal impact. While controversial, tariff policies could generate meaningful federal revenue. According to the Congressional Budget Office, if implemented tariffs stay in place, they are estimated to reduce the primary deficit (which excludes net outlays for interest) by $3.3 trillion over the next 10 years.
  • Financial system dependency. Global trade, commodities, and debt markets remain dollar-denominated. This network effect creates enormous switching costs for any regime change.

The role of gold

If you owned stocks this year, your portfolio returns have been solid. Have you missed out on gold? Absolutely. But chasing an asset with a 65% year-to-date appreciation is precisely when momentum strategies become most dangerous (FactSet, LBMA Gold Price per Ounce, October 20, 2025). Gold plays both a real and sentimental role as a proxy for money. Practically speaking, consumers do not purchase goods or services with gold coins or bars. Vendors do not accept payment in gold, only U.S. dollars. However, central banks hold gold in their reserves alongside dollars, euros, and yen.

Gold’s recent outperformance leaves the door open for a healthy correction when momentum investors exhaust themselves. What would cause gold to continue rising? The most obvious answer is if the market’s current fear of a regime change from the dollar starts to become reality. Gold would be the natural outlet if markets genuinely believed the U.S. dollar’s place at the center of the global monetary system was nearing an end. But this would require a fundamental breakdown in U.S. institutions, fiscal policy, or global trade that we have not yet witnessed.

Bitcoin: Digital gold or digital risk asset?

Alongside gold, bitcoin has also had a notable (though more volatile) move higher, a dynamic often attributed to the same concerns over dollar debasement. As much as bitcoin is promoted as “digital gold,” cryptocurrency returns broadly remain highly correlated with equity markets. In periods when investors have large risk appetites, bitcoin rallies. When investors become fearful, bitcoin trades down alongside stocks. The correlation is not perfect, but it’s strong enough to question the “digital gold” narrative.

Bitcoin’s correlation to the S&P 500 has at times surpassed 0.9 over the past three years, far higher than gold’s near-zero correlation to equities (YCharts, Bitcoin S&P 500, October 20, 2025). While bitcoin has outpaced the equity market, its return looks remarkably similar after adjusting for its significantly higher volatility. These factors make bitcoin appear to be more of a leveraged bet on risk appetite than a genuine hedge against monetary debasement.

There are legitimate reasons to be constructive on bitcoin’s long-term prospects: growing institutional adoption following ETF approvals, improving regulatory clarity in major markets, and its role as a scarce digital asset in an increasingly digital economy. But there isn’t a clear pattern that bitcoin will hedge the risk within equity-dominated portfolios.

The bottom line

Each year brings a new moniker from the financial media: Over the past decade, we’ve had PIGS (Portugal, Italy, Greece, and Spain), TINA (There Is No Alternative), FAANG (Facebook [now Meta], Apple, Amazon, Netflix, Google), the Magnificent 7, and the Great Rotation. Some themes persist and prove prescient, although many are simply flavors of the moment—capturing headlines before fading into the background.

Like TINA and the Great Rotation before it, the debasement trade may prove more narrative than reality. While gold could serve as insurance against monetary instability, chasing recent strong returns can prove backward-looking. Many declared the dollar at the end of its run throughout our careers—after 1970s inflation, after the 2008 financial crisis, and after COVID-19 stimulus. So far, reports of its demise remain greatly exaggerated. The structural advantages of U.S. capital markets, the absence of credible alternatives, and the network effects of dollar-based systems create enormous barriers to displacing or debasing the dollar.

At Cerity Partners, we believe that successfully and consistently timing the market is impossible. Instead, we work with our clients to build diversified, durable wealth management plans designed to help their legacies endure across generations. While “debasement” may be the buzzword of 2025, our focus remains on long-term, fundamentals-driven strategies that stand the test of time. If you have questions about the current market environment or would like to learn how Cerity Partners can help you build a disciplined, lasting approach to your wealth, please contact your advisor or request an introduction today.

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