Gold as a Safe Haven: Profiting from Currency Debasement

On 13th October 2025, gold surpassed its last week’s all-time high and hit $4078.05 per ounce. For years treated as a “pet rock,” an asset with no dividend payment, it is now termed as “debasement trade” by Wall Street; the rally in gold looked like a speculative move and has delivered a solid 41% return in the last year, which is only surpassed by Bitcoin’s approx. 121% return and platinum’s approx. 80% move in the last 1 year (Oct24-Oct25, all assets measured in USD terms).

So, what is debasement?

Debasement refers to a reduction in value, quality, or integrity of an asset, currency, or brand. In the case of gold, Wall Street is referring to the rise as debasement trade with reference to currency devaluation across the globe.

Traditionally gold’s main appeal is as insurance against geopolitical or economic instability or loss of trust in other assets such as the dollar. Across the investment industry, now gold is seen as a safe harbor asset in a way the dollar used to be viewed.

Phases of Gold Run:

The gold rally can be divided into three stages

Stage 1: Geopolitical Shock and Central Bank Response

n  The first wave of the gold rally was triggered by major geopolitical tensions. When the West froze Russia’s assets in response to its invasion of Ukraine, followed by severe sanctions and trade restrictions, it sent a strong message to other nations: Foreign reserves held in U.S. dollars or euros could be politically weak. Many central banks, especially in emerging markets, started buying a lot of gold to protect themselves from geopolitical and currency risk. This was the start of the first big rise in gold prices.

Stage 2: Loss of Faith in U.S. Economic Leadership

n  The "Trump Trade War" brought about the rise of protectionist policies in the second stage. Tariffs and retaliatory actions messed up trade around the world and made people less sure that the U.S. was a stable part of the global economy. As trust in U.S.-led globalization faded, more and more investors and sovereign institutions turned to gold as a safe, neutral place to keep their money.

Stage 3: The Fed is dovish and the job market is getting worse

n  The U.S. Federal Reserve has moved toward a more dovish monetary policy stance in the third and most recent stage, which is due to signs that the labor market is cooling down. The U.S. dollar tends to get weaker when rates go down or even when people think rates will go down in the future. This makes gold look better in comparison. Also, lower interest rates make it less expensive to hold non-yielding assets like gold, which increases demand even more.

So, what is fueling the run in the gold run?

There are a lot of things that are making gold prices go up. Three main ones are currency devaluation, central banks buying gold, and rising debt and fiscal dominance.

Let's get the same thing. Massive debts and populistic politics in the US have threatened the value of “fiat currencies” like the dollar. Moreover, keeping lower interest rates to spur economic growth has tended to reduce the return on dollar-denominated assets.

Meanwhile in Asia, Japan’s ruling Democratic party nominee, Sanae Takaichi, wants more economic reforms and stimulus from the Bank of Japan and does not want to raise the interest rate too much and in EU, mounting debt pressure has led to the resignation of the 4th prime minister in less than a year in France, leading to more political uncertainty and fuelling the gold prices.

Central banks across the world have been on a gold purchasing spree in the last two years, leading to increased demand in the gold prices. On average in FY24-25, RBI has added approx. 57.5 tonnes of gold (2025), China as of 2024 has added 44 tonnes, and other central banks have followed suit.

Fiscal dominance is when central banks shift their priorities from inflation to helping the treasuries, leading to an increase in inflation over a period.  Fiscal dominance is what is expected by U.S. President Donald Trump and what is also likely to be the route of Japan’s Takaishi, the incoming prime minister. This shift can imply lower currency, higher expected inflation, and higher gold prices.

Road ahead:

The way ahead for gold looks to reach new highs and then consolidate, mostly based on actions in the “Trade War” and global unrest caused by the same. If the geopolitical tensions across the globe keep on moving at the same pace, we might have gold “shining like a North Star” among all asset classes in the near future.