The 'debasement trade' is the talk of Wall Street. What is it and is it too late to get in?

Published Thu, Oct 9 20252:33 PM EDTUpdated Fri, Oct 10 202510:54 AM EDT

Key Points

Factors ranging from geopolitical tensions to the prospect of lower interest rates to free-spending global governments are pushing the "currency debasement" trade.
The debasement trade is a bet that government borrowing and money printing will erode the value of the U.S. dollar, so investors are shifting cash into assets like gold, crypto, stocks and real estate that can hold their value.
To be sure, Wall Street experts are hesitant to ascribe too much of the movement to dollar debasement and say a variety of factors are at play.

Factors ranging from geopolitical tensions to the prospect of lower interest rates to free-spending global governments are pushing the "currency debasement" trade that has led to record highs across risky asset classes. Gold, for one, has scaled to eye-watering heights , surging more than 50% in 2025 as both an inflation hedge and safe-haven play. Similarly, silver and other precious and industrial metals have posted outsized gains, while bitcoin has eclipsed the $120,000 threshold as investors look for bets against the tumbling U.S. dollar continue. "A surge of distrust in fiat currencies, or so-called currency debasement trade, has sent gold to new records," said Alex Kuptsikevich, chief market analyst at FxPro. In short, the debasement trade is a bet that government borrowing and money printing will erode the value of the U.S. dollar, so investors are shifting cash into assets like gold, crypto, stocks and real estate that can hold their value. (See here from last week when CNBC Pro discussed the 'debasement trade' chatter on Wall Street trading floors.) Kuptsikevich cites a of factors behind the trend: Geopolitical tensions with the U.S. government in a shutdown, France seeing a revolving door of prime ministers who can't solve its fiscal woes, the prospect that President Donald Trump's tariffs could be overturned in court, which could see an increase in Treasury issuance to pay refunds, and general concerns about surging government debt. Also, Japan is expected to turn to higher deficit spending and lower interest rates to goose its economy. What it amounts to is flight from the U.S. dollar and some other currencies that comes with global central banks buying gold and investors looking for alternatives. "There is a growing trend away from the classic portfolio structure with 60% in stocks and 40% in bonds," Kuptsikevich said. "In the current environment, it is recommended to invest about 20% in alternatives such as precious metals and cryptos." Massive market moves The numbers behind the trade are striking. As the U.S. dollar index, which measures the greenback against a basket of foreign currencies, has slumped more than 8%, other assets have surged. Gold has soared more than 50% and silver more than 60%, while copper, an industrial metal considered a bellwether of economic growth, has picked up 26%. Bitcoin has registered gains approaching 30%, and of course stocks have scaled new heights. The Nasdaq Composite, with its focus towards tech stocks, is up 19% year to date while the Dow Jones Industrial Average has gained a more modest 9%. .DXY @GC.1 YTD line The dollar vs. gold "Debasement, that's been going on since the history of mankind. But this move has been, 'we need to own less dollars and if we do own dollars, it's going to be hedged,'" said Peter Boockvar, chief investment officer at One Point BFG Wealth Partners. "Foreigners want less U.S. dollar exposure. They're still happy to invest here, but they're going to hedge out their dollar exposure and and own gold and hedge out all [their] fiat currency exposure to at the same time." To be sure, Boockvar and others on Wall Street are hesitant to ascribe too much of the movement to dollar debasement. "The equity rally ... was the AI tech trade that got a second wind after getting knocked on the DeepSeek news in late January. And who doesn't want to buy stocks when the Fed is cutting interest rates?" he said. "Governments and corporates are flooding the torpedo tubes," added Tony Pasquariello, Goldman's global head of hedge fund coverage, in a note to clients. "If you asked why the economy and the stock market have performed better-than-feared, I suspect a good bit of the durability traces back to all of this spending." Others cite a multitude of factors, particularly when it comes to gold. Global central banks now own more gold than they do U.S. Treasurys for the first time in nearly 30 years, a trend that reflects a move towards diversification in assets. Ed Egilinsky, head of alternative investments at Direxion, noted that gold has continued to climb even as the dollar has staged a modest rally in recent weeks. "There's been other factors," he said. "Some people are worried still about inflation right now and, ballooning debt, the fact that also the Fed looks like it might be committed to more rate cuts. So in that preferred flight to safety, gold becomes more attractive." Likewise for bitcoin, which Egilinsky sees as a beneficiary of a risk-on asset class. "Bitcoin, to me, is a risk-on asset at the end of the day. It's a great trading vehicle, until proven otherwise, and if you've looked at gold, it has some defensive qualities, has low correlation to stocks and bonds," he said. "Gold has different characteristics, and I think one could be looked at more as maybe an asset allocation towards diversification. The other, to me, is more of a risk-on trading type of vehicle in the case of bitcoin." Chances in strategy With a multitude of reasons behind the trade, Wall Street is watching the debasement issue closely and in some cases adjusting expectations. Citigroup, for one, has raised its price targets on copper and tin. "We expect concerns about currency debasement (that policymakers, led by the US, will try to run economies hot and forward-looking expectations of physical market deficits through 2026 (on stronger demand underpinned by lower interest rates) to dwarf near-term fears for growth and US employment," the firm said in a note. Beneficiaries of the trade should stretch across hard assets, said Jeff Currie, chief strategy officer at Carlyle Energy Pathways. "The de-dollarization theme [that has] been in place for five plus years continues to drive gold. Then we can add in the debasement trade, which really started to gain steam with the the government shut down," Curries said Thursday on CNBC. "We're seeing it in all of these hard metals, and I think there's a lot more upside." ( Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here . )