Jefferies turns bullish on gold

Jefferies, in its latest GREED & fear report, has turned increasingly bullish on gold, citing deteriorating fiscal conditions in the United States and Japan, growing constraints on monetary policy, and improving cash generation among gold-mining companies. The brokerage highlighted that US federal government debt has crossed the $40 trillion milestone, with the fiscal deficit for October 2025-July 2026 reaching $1.799 trillion, surpassing the full-year FY25 deficit of $1.775 trillion. July's deficit of $432 billion was the highest monthly deficit since March 2021. Jefferies noted that rising Treasury yields and the pressure on the United States — Federal Reserve to avoid raising interest rates due to debt-servicing implications are bullish for gold. Geopolitical risks, including tensions surrounding Iran and the closure of the Strait of Hormuz, also support gold as a hedge, with oil and energy stocks being the best hedge and gold second-best. Additionally, gold miners are generating rising free cash flow, with the PHLX Gold and Silver Index's free cash flow yield improving from negative 2.01% in June 2023 to 3.74% currently, while the S&P 500's free cash flow yield has declined to 2.67%. The spread between these yields has turned positive, making gold-mining equities increasingly attractive.