Debasement Trade

By John Heneghan with research assistance by Grok and Gemini AIs

The term “Debasement Trade” has been trending on social media sites and on financial news networks between October 5th and October 9th, 2025, suggesting something noteworthy within the collective consciousness.  The significant increase in search and discussion volume corresponds with major market movements and macroeconomic events in early October 2025:

• Gold, silver, and bitcoin have reached recent record highs.
• Ongoing U.S. government shutdown has raised concerns about fiscal stability.
• U.S. dollar has been experiencing a noticeable decline.

The ‘Debasement Trade’ is surging, driven by a perfect storm of policy anxiety over government debt, inflation, and weakening confidence in fiat currencies generally.  Investors more broadly may be preparing for a new global monetary policy regime and financial system necessitated by the clash between government largesse (fraud, waste and abuse) and technological innovations that hold the promise of controlling this beast.

The “Debasement Trade” is defined as any investment strategy where individual and institutional investors move their money from fiat currencies, such as the U.S. dollar, into hard or scarce assets that are perceived as more stable stores of value. Residents of developing nations, like Argentina, Brazil, China, India and Zimbabwe, have learned the tricks of the debasement trade the hard way over the centuries. In theory, hard assets are somewhat insulated from devaluation by governments through excessive money printing.

Recent Performance for Debasements

Global currency debasement has propelled investment capital toward tangible, inflation-resistant assets in 2025. Hard assets like gold and precious metals serve as classic hedges against fiat erosion, while gold miners and strategic mineral plays amplify leverage to underlying commodity price trends. Spot prices for gold and silver have hit multi-year highs, outpacing broader equities, while miner ETFs have leveraged operational efficiencies and margin expansion from falling input costs like oil.  Broader precious metals have surged 45–65% YTD, with miners outperforming spots due to equity-like upside in a low-rate environment.

The following table of year-to-date (YTD, Jan 1–Oct 9, 2025) and last 12 months (L12M, Oct 9, 2024–Oct 9, 2025) performance reflects this “debasement trade,” with central banks diversifying reserves into gold (now the second-largest global reserve asset) and demand surging for uranium and rare earths tied to energy transitions and defense and technology supply chains. These hard or real assets have decisively outperformed both the S&P 500 and US Aggregate Bonds.

As we’ve covered in four monthly newsletters starting in April, 2025, we developed an internal strategic materials fund (basket or sleeve of securities) called Forge Ahead to align with these perceived long-term structural trends of the U.S. strategic sourcing of raw materials. We developed Forge Ahead sleeve because we were uncomfortable taking the easy thematic path with the Rare Earth/Strategic Minerals ETF (REMX). We were uncomfortable with REMX’s historical Chinese company exposure of 30% to 40% since China is the U.S. primary adversary in this economic competition.

As a quick reminder, the building blocks for Forge Ahead were as follows:

1. Strategic Materials – Rare Earth Elements (REEs), Semiconductors, and Lithium. Strategic materials like rare earths are vital for defense and technology but are heavily reliant on foreign supply.
2. Critical Materials – Cobalt, Graphite, and Aluminum. Critical materials like cobalt are essential for batteries, yet their domestic supply chains are vulnerable.
3. Essential Materials – Steel, Copper, and Cement. These essential elements are the building blocks for manufacturing plants and related infrastructure.

Forge Ahead is comprised of sixteen natural resource equities with position sizes ranging from 3% to 7.5% within the sleeve.  Client model allocations to the Forge Ahead basket roughly range from 3% to 7% depending on client risk tolerance with more risk tolerant accounts receiving a higher allocation.

Servant client portfolios were generally deployed to Forge Ahead securities in mid-July.  We are tracking a proxy Forge Ahead portfolio that is up 17.5% from its hypothetical deployment through the business close on October 9^th.  Like REMX ETF’s performance year-to-date and over L12M, performance gains in the short life of the Forge Ahead sleeve have been broad-based, led by Lynas Rare Earths Limited (LYSDY) up more than 100% followed by gains of 30% or more by MP Materials (MP), Alpha Metallurgical Resources, Inc. (AMR), Albemarle Corporation (ALB) and Southern Copper Corporation (SCCO).  (Past performance of this hypothetical Forge Ahead sleeve is not necessarily indicative of future performance, nor actual client account performance achieved using this strategic allocation.)

Insights from Investment Luminaries

Prominent investment voices have been echoing this debasement narrative, viewing real assets as essential portfolio anchors amid eroding trust in fiat currencies. While X posts from Ray Dalio and Paul Tudor Jones were sparse on specifics, their recent public statements (interviews, writings) align with a 1970s-style inflationary regime redux.

• Ray Dalio (Bridgewater Associates Founder): In early October 2025, Dalio likened today’s environment to the early 1970s—high debt, supply shocks, and monetary easing—urging investors to hold “more gold than usual” as the premier hedge against debasement and geopolitical risks. Dalio emphasized gold’s uniqueness as a bulwark in a “changing world order.”
• Paul Tudor Jones (Tudor Investment Corp Founder): Jones, in October 2025 interviews, called 2025 “so much more potentially explosive than 1999” due to bull market froth and policy-induced inflation, recommending a mix of gold, cryptocurrencies, and tech stocks for the rally’s “blow-off top.” He sees gold as a core inflation hedge, noting ingredients for a “massive rally” in real assets before any peak, amid deficit-fueled dollar weakness.
• JPMorgan Analysts: Dubbed the “debasement trade” in October 2025, citing flows into gold, silver, Bitcoin, uranium, copper, and shipping as unprintable assets amid Washington gridlock and yen/dollar slides.

Confirming Statements from U.S. Treasury

Importantly, Scott Bessent, confirmed as U.S. Treasury Secretary in early 2025, has been vocal on fiscal-monetary mismatches exacerbating debasement, aligning with investors’ real-asset pivot. His rhetoric since his February appointment as Treasury Secretary underscores policy risks without endorsing specifics, but hints at potential structural shifts in U.S. fiscal and monetary policy.

• Scott Bessent: In a September 2025 critique, Bessent lambasted the Fed’s Quantitative Easing policies for creating “perverse incentives for fiscal irresponsibility” and widening wealth gaps via “wealth effect” policies—implicitly fueling debasement fears that have boosted gold. Earlier, in February 2025, he hinted at exploring a “new gold exchange standard” to counter dollar erosion, noting gold’s role as a “gauge of monetary debasement.” On Bitcoin (another debasement trade proxy), Bessent demurred in August (“We’re not buying that… yet”) but acknowledged bitcoin’s real asset-like appeal amid U.S. policy volatility.

With gold’s market cap increasing $8.9 trillion year-to-date in 2025 and bitcoin market cap increasing another $1.0 trillion, even a modest “debasement trade” allocation would significantly enhance the performance traditional 60/40 stock-bond portfolio. Servant Financial client portfolios have long held, meaningful allocations to gold, bitcoin and other inflation-hedges for their unique portfolio diversification benefits against the universal, yet unseen tax from inflation and fiat currency debasement.  The more recent addition of the Forge Ahead sleeve has added another hardened weapon against currency debasement and geopolitical risks.