Financial markets experienced significant turbulence in mid-August following the US Treasury Department's announcement of a major monetary policy shift. Gold and Bitcoin initially surged, but their trajectories have since diverged sharply.
The Initial Catalyst
On August 19, the US Treasury Department announced it would double the maximum size of liquidity-support buybacks for longer-dated government debt, raising the limit from $2 billion to $4 billion per operation. This announcement came after the 30-year Treasury yield had reached 5.34% the previous day.
The market reaction was immediate and dramatic. The 30-year yield corrected to 5.2%, while gold and Bitcoin rallied significantly. Gold rose from $4,360 per ounce to $4,530 per ounce within hours, eventually reaching $4,700 on August 25—its highest price in over three months. Bitcoin experienced an even steeper climb, breaking through resistance levels to reach $81,500 after struggling below $65,000 for weeks prior.
The Reversal
Market sentiment shifted following a Jackson Hole speech by Federal Reserve Chairman Kevin Warsh, which markets interpreted as signaling upcoming rate hikes. The hawkish tone dampened risk appetite across asset classes.
Gold bore the brunt of the reversal, plunging to $4,300 and erasing not only its August gains but falling below its starting point—down more than 8.5% from its peak. Bitcoin pulled back to $77,000 but remained approximately 20% higher than the $64,000 level where its rally began.
Spot Bitcoin ETFs have experienced more withdrawals than inflows in recent business days as initial momentum fades, suggesting continued pressure on cryptocurrency prices.
