Goldman Sachs Veteran Warns: US Treasury Repo Fuels Devaluation Trades, Gold and Silver Enter Structural Market Trends

Jeffrey Currie, former head of commodity research at Goldman Sachs and veteran analyst, recently elaborated on the current market's "structural depreciation trade" logic on social platform X.

He believes that the global economy is currently in a unique macroeconomic environment: physical scarcity in the real world is continuously driving up commodity prices, while policies of "financial repression" on the financial side are artificially suppressing bond yields. This dual squeeze not only changes the logic of asset valuation, but also makes commodities a key hedging target for capturing scarcity premiums and countering currency depreciation.

One of Currie's core arguments is the failure of traditional market self-regulation mechanisms. In a normal cycle, rising commodity prices would drive up US Treasury yields, thereby suppressing demand and smoothing inflation. However, Currie points out that the current behavior of the US Treasury has replaced market clearing. Especially after the 30-year Treasury yield hit a near 17-year high of 5.32%, the Treasury decided to double the scale of long-term bond buybacks. Currie views this move as ironclad evidence that the bond market cannot withstand supply pressure.

Moreover, from the Strategic Petroleum Reserve (SPR) dropping below 300 million barrels to providing dollar liquidity support for major foreign bondholders such as Japan and Gulf countries, all these interventions are seen by Currie as acts of "financial repression." When the Treasury begins to directly intervene in bond market pricing, the "yield brake" that could formerly cool commodity rallies disappears, opening the door wide for scarcity-driven inflation.

Currie particularly emphasizes that investors focus excessively on crude oil prices while neglecting the real costs on the consumer side. This week, the diesel crack spread settled above $100 a barrel for the first time ever—reaching $102.20—which is four to six times the normal range. Currie explains that due to geopolitical conflicts damaging refining facilities and years of underinvestment, the global refining capacity gap has reached 5 million barrels per day.

He sharply points out that most market participants do not directly consume crude oil; the real price signal comes from downstream fuels. Weighted by consumption, the current fuel basket price is about $165, far above the WTI crude oil quote of $85. Since the vast majority of commodity costs can be simplified to "raw materials + diesel," soaring energy costs are rapidly permeating the agricultural and industrial sectors.

The current supply risk is not about volatility of single varieties, but rather systemic blockages in global supply chains. Currie lists ongoing turmoil from the Strait of Hormuz to the Red Sea, record low water levels on the Rhine River, and draft restrictions in the Panama Canal as logistics woes. Notably, in the Black Sea region, closures at relevant ports and terminals have resulted in a drastic reduction of peak season grain export capacity in that local area.

In agriculture, the US Department of Agriculture (USDA) recently cut its corn production forecasts, while the National Oceanic and Atmospheric Administration (NOAA) predicts an 81% chance of a strong El Niño event by year-end. Currie believes that climate risk and logistics bottlenecks are jointly driving structural pressure throughout the food supply chain, and the recent 10% weekly surge in corn prices is just the beginning.

Citi has also previously stated that currency depreciation trades need to find new breakthroughs, and is optimistic about gold’s performance. This view is echoed by Currie. He notes that within hours after the Treasury buyback news was announced, the gold price surged by 4% to $4,510, silver jumped nearly 5%, and the Quantix Commodity Index hit a new all-time high.

Currie concludes that commodities, as an asset class capable of directly capturing physical scarcity, are currently in an excellent allocation window. He reveals that he increased his long positions in gold, silver, and agricultural products last week. In his view, the bond market is about to realize the signals already sent by the commodity market—as scarcity meets artificially suppressed yields, true currency depreciation is just beginning.