In August 2026, the US national debt surpassed the psychologically and economically significant threshold of $40 trillion (approximately €34,4 trillion) for the first time in history. This milestone was reached approximately two fiscal years earlier than predicted by the Congressional Budget Office, which had previously expected this only by 2028. In response to growing pressure from the bond market, the US Department of the Treasury took emergency measures, doubling the volume of buybacks of older government securities.
Below is a detailed analysis of how this mechanism works, the impact it has on the bond market, and why this event is a powerful driver for the gold market.
What is debt buyback and how does it work?
The Treasury bond buyback program functions as a liquidity management tool, not as debt reduction. The US Treasury uses cash already available in its accounts (for example, balances from the Treasury General Account) to repurchase older, less liquid bonds with long maturities (10–30 years) from investors.
It is important to understand: this operation does not reduce the total volume of national debt. It merely changes its structure, removing hard-to-sell securities from the market and increasing the overall liquidity of the segment. From September 9, 2026, the maximum volume of each such operation will be doubled: from $2 billion to $4 billion, and the program will continue until the next quarterly auction on November 4.
Impact on the bond market: tactical relief, strategic risks
1. Short-term market calming
The Treasury's decision was received positively by the market. Against the backdrop of the so-called "buyers' strike" observed since the end of June, the yield on 30-year Treasury bonds had previously risen to its highest level since 2007. After the announcement of the buyback doubling, the yield on 30-year securities fell by approximately 9 basis points, and 10-year securities by 6 basis points, which simultaneously gave momentum to the growth of major Wall Street indices.
2. Skepticism of experts
Despite the immediate reaction, many analysts consider the measures insufficient. The scale of the program's expansion looks modest against the backdrop of the $32 trillion Treasury market it is intended to stabilize. Renowned economist Mohamed El-Erian noted that the market's overreaction reflects investors' hopes for more significant intervention in the future rather than the direct effect of the buybacks themselves. Other experts called this decision an improvisation that violates the Treasury's usual practice of providing advance and consistent information about borrowing plans.
3. The vicious cycle of debt
The fundamental problem remains unresolved. The higher the debt burden, the more cautious investors are about long-term lending to the US, which pushes yields higher. In turn, higher yields increase the government's cost of servicing the debt, which further inflates the deficit and the volume of debt that needs to be refinanced. In just the first 10 months of the current fiscal year, the US government borrowed $1,8 trillion, exceeding the figures for the entire previous year.
Impact on the gold market: a fundamental bullish trend
The gold market's reaction to the news of crossing the $40 trillion mark was immediate and unequivocal. Gold traditionally acts as the primary hedge against fiscal dominance, inflation, and the devaluation of fiat currencies.
1. Price growth amid fiscal anxieties
In August 2026, amid anxieties over the record US national debt, gold and silver demonstrated a sharp surge. The dynamics of precious metals mirrored the upward trend of alternative assets: in just a short period, gold rose in price by nearly 5%, updating the local highs of the summer of 2026. Analysts note that if the current rate of debt growth continues, gold is forecast to rise further, as it remains the best defensive asset against dollar devaluation and a bond market collapse.
2. A paradigm shift in demand
Rising debt undermines confidence in long-term US paper obligations. In response, central banks around the world continue to diversify their reserves, reducing the share of the dollar and increasing gold holdings. This structural shift creates constant baseline demand for the metal, regardless of short-term fluctuations in Treasury bond yields.
3. The paradox of yield and gold
Typically, a decline in bond yields (triggered by the Treasury's buyback) lowers the opportunity cost of holding gold, which does not generate interest income, thereby supporting its price. However, even if yields were to rise temporarily, the narrative surrounding the $40 trillion debt outweighs this factor: investors are increasingly viewing gold not merely as a hedge against inflation, but as insurance against systemic fiscal risks.
Conclusion
The emergency doubling of the US Treasury's bond buyback volume is a tactical bandage applied to a structural wound. It is capable of temporarily smoothing out volatility in the bond market and preventing a sharp spike in interest rates, but it does not resolve the fundamental imbalance: spending on social security, defense, and debt servicing continues to outpace budget revenues.
For investors, crossing the $40 trillion mark serves as a clear signal. While the bond market remains a hostage to Washington's fiscal policy, gold is strengthening its position as one of the most reliable assets for capital preservation amidst growing uncertainty and the long-term devaluation of the dollar.
