Global brokerage Jefferies has strengthened its positive outlook on gold, pointing to growing fiscal pressures in major economies, geopolitical uncertainty and improving financial conditions for gold mining companies.
The brokerage's latest GREED and fear report highlights the deteriorating fiscal position of the United States and Japan as important factors supporting gold's appeal. The US federal government's debt has now crossed the 40 trillion dollar mark, raising concerns about the country's long term borrowing requirements and debt servicing costs.
US debt crosses 40 trillion dollars
The US national debt has reached a historic milestone by crossing 40 trillion dollars.
Treasury data showed that US debt reached approximately 40.05 trillion dollars on August 18, 2026. The debt has more than doubled since 2017, reflecting years of government borrowing and persistent fiscal deficits.
The increase in debt has become a major concern for investors because higher borrowing requirements can put upward pressure on government bond yields and interest costs.
Recent market movements have already reflected these concerns. US long term Treasury yields have risen sharply, with the 30 year yield moving above 5 percent.
Why fiscal concerns are supporting gold
Gold is often viewed by investors as a store of value during periods of financial uncertainty.
When concerns increase over government debt, inflation, currency stability or geopolitical risks, some investors increase their allocation to gold as part of a diversified portfolio.
Jefferies believes the worsening fiscal position of major economies is creating a favourable environment for the precious metal.
The brokerage has also pointed to increasing constraints on monetary policy as governments deal with high debt and rising borrowing costs.
Japan also faces fiscal pressure
The United States is not the only major economy facing concerns over government finances.
Japan is also experiencing rising fiscal pressures and higher government bond yields.
The combination of high debt levels, changing monetary conditions and rising borrowing costs has increased investor attention on the fiscal positions of major developed economies.
Jefferies sees these developments as another factor that could support demand for gold.
Geopolitical tensions add to demand
Geopolitical uncertainty has also strengthened the case for safe haven assets.
Continuing tensions involving Iran have affected global markets, particularly energy prices and government bond markets.
Oil prices have risen sharply amid concerns over supply disruptions, while investors have become more cautious about global economic conditions.
Recent market reports show that gold has also benefited from demand for alternative assets as concerns over US debt and geopolitical developments increased.
Gold miners gain attention
Jefferies is not only positive on gold itself. The brokerage has also highlighted the improving financial position of gold mining companies.
Higher gold prices can increase miners' revenue, provided production costs remain under control.
Improving free cash flow can give mining companies greater flexibility to reduce debt, invest in production, return money to shareholders or strengthen their balance sheets.
Jefferies believes this improvement in cash generation makes gold mining companies more attractive in the current environment.
Gold compared with other assets
Gold does not generate interest or dividends like bonds and shares.
However, its appeal can increase when investors become concerned about inflation, currency depreciation, government debt or geopolitical instability.
The recent movement in gold prices demonstrates how investors are responding to these concerns.
Gold prices recently moved above 4,600 dollars per troy ounce and were on track for another strong weekly performance.
Bond yields remain important
The relationship between gold and government bond yields remains important for investors.
Gold does not pay interest, so rising bond yields can normally make interest bearing assets more attractive relative to gold.
However, the current market environment has been unusual because rising yields are occurring alongside growing concerns about fiscal sustainability and inflation.
These concerns can increase demand for assets such as gold despite higher nominal yields.
US fiscal deficit remains a concern
Jefferies has also pointed to the deteriorating US fiscal position.
The US fiscal deficit reached 432 billion dollars in July, according to the brokerage's assessment, marking the highest monthly deficit since March 2021 and a record deficit for July.
Persistent deficits mean that the US government needs to continue borrowing to finance the gap between expenditure and revenue.
Investors are therefore paying closer attention to the government's ability to manage debt and interest costs.
Higher borrowing costs create pressure
As government debt increases, interest payments can consume a larger share of public finances.
US interest payments have already become a significant component of government spending.
The rise in Treasury yields can increase the cost of refinancing existing debt and issuing new debt.
This is one reason why investors are closely monitoring the long term direction of US borrowing costs.
Gold as a hedge
Jefferies strategist Christopher Wood has described gold as a strong hedge against the current combination of fiscal and geopolitical risks.
However, Wood has also indicated that energy and oil related investments could provide an even stronger hedge in the present geopolitical environment because of disruptions in energy markets.
This distinction is important because it shows that Jefferies' positive view on gold is part of a broader strategy focused on assets that can potentially benefit from inflation and geopolitical uncertainty.
Currency concerns
Fiscal problems can also influence investor confidence in a country's currency.
The US dollar has weakened recently as concerns over government finances and monetary policy uncertainty have increased.
A weaker dollar can support gold because the precious metal is priced internationally in US dollars.
Gold can therefore benefit from both safe haven demand and currency related factors.
What investors should watch
Investors will closely monitor several factors that could influence gold prices in the coming months.
These include US Treasury yields, inflation data, Federal Reserve policy, developments involving Iran, oil prices and changes in global central bank demand for gold.
The direction of the US dollar will also remain important.
If fiscal concerns continue to intensify while geopolitical tensions remain elevated, demand for gold could remain strong.
Outlook for gold
Jefferies' latest assessment suggests that the brokerage sees several structural factors supporting gold.
The combination of US and Japanese fiscal pressures, geopolitical uncertainty and stronger cash generation by gold miners provides a favourable backdrop for the sector.
At the same time, gold prices can remain volatile because they are affected by interest rates, currency movements, investor positioning and global economic conditions.
Therefore, a bullish outlook does not mean that gold prices will move higher continuously.
Conclusion
Jefferies has adopted a more positive stance on gold as concerns over government debt, fiscal deficits and geopolitical risks increase.
The US national debt has crossed 40 trillion dollars, while Japan is also facing fiscal challenges. Rising bond yields and uncertainty surrounding government finances have increased investor interest in alternative stores of value.
Jefferies also sees improving cash generation among gold mining companies as an additional positive factor for the sector.
With geopolitical tensions involving Iran continuing to influence oil prices and global markets, gold remains an asset that investors are watching closely.
However, gold prices can be volatile, and investors should consider their individual financial objectives and risk tolerance before making investment decisions.