u/rugger403

The author points out Japan and China, the largest foreign holders of U.S. Treasuries, are starting to buy gold as the U.S. deficit grows. Central bank gold demand is a structural tailwind; continued U.S. fiscal deterioration could accelerate the shift away from Treasuries into hard assets. Long GLD as a hedge against U.S. debt-confidence erosion and central bank diversification into gold. Deficit fears fade, real yields stay high, the dollar strengthens, or central bank buying pauses — any of these could pressure gold.

The Treasury plans to fund the deficit with T-bills while Warsh shrinks the Fed’s balance sheet, adding more longer-dated Treasury supply to the market. More long-end supply combined with reduced Fed demand should pressure long-dated Treasury prices, pushing yields higher. Short TLT as a tactical duration bet against longer-dated Treasury oversupply and Fed balance-sheet reduction. A flight-to-safety bid from equity or credit stress could force Treasury yields lower; yield curve positioning could also get messy.