Global brokerage firm Jefferies has turned increasingly bullish on gold, pointing to worsening fiscal conditions in the United States and Japan, along with improving cash generation among gold-mining companies. According to the latest GREED & fear report, these macroeconomic factors create a favourable environment for bullion.
The brokerage highlighted the deteriorating fiscal position of the US and rising government debt-servicing pressures. US federal government debt has crossed the $40 trillion milestone. Furthermore, the fiscal deficit for the first ten months of the current financial year has already surpassed the full-year deficit recorded in FY25.
Data cited in the report shows that the US fiscal deficit rose to $432 billion in July, marking the highest monthly deficit since March 2021. The fiscal deficit for October 2025 to July 2026 stood at $1.799 trillion, compared with $1.775 trillion for the entire FY25. Jefferies also noted that rising Treasury yields place mounting pressure on the Federal Reserve to avoid raising interest rates due to the implications for government debt servicing.
"The above fiscal issues in America and Japan, and the constraints they impose on monetary policy, are clearly bullish for gold," Jefferies stated in the report.
Geopolitical risks further support the case for safe-haven assets. The brokerage highlighted ongoing tensions surrounding Iran and the closure of the Strait of Hormuz. While noting that oil and energy stocks remain the best hedge, Jefferies identified gold as the second-best hedge. The report also pointed out that the price gap between crude oil and refined products, such as diesel, continues to widen.
Beyond macroeconomic bullion trends, Jefferies observed an increasingly attractive investment proposition in gold-mining companies. The brokerage stated that gold miners are generating rising free cash flow at a time when free cash flow trends for the S&P 500 are deteriorating.
According to the report, the Philadelphia Stock Exchange Gold and Silver Index's free cash flow yield rose from a negative 2.01 per cent at the end of June 2023 to 5.07 per cent at the end of July 2026, and currently stands at 3.74 per cent. In contrast, the S&P 500 free cash flow yield declined from 4.75 per cent in September 2022 to 2.67 per cent.
The spread between the Gold and Silver Index free cash flow yield and the S&P 500 free cash flow yield increased from a negative 584 basis points in October 2023 to a positive 233 basis points at the end of July, standing at 108 basis points currently.
Overall, Jefferies' analysis concludes that fiscal deterioration, constrained monetary policy, geopolitical uncertainty, and improving fundamentals for gold miners make both bullion and selected gold-mining equities increasingly attractive investment options.
"Jefferies' assessment underscores how macroeconomic factors like mounting government debt and fiscal deficits directly influence commodity markets and investor sentiment. For businesses and investors navigating global volatility, monitoring fiscal strains in major economies like the US and Japan provides critical visibility into asset allocation shifts toward safe-havens like gold and energy hedges." — Dr. Shishir Gupta, Founder & CEO, StartupLanes
