Jefferies has become increasingly positive on gold, pointing to deteriorating fiscal conditions in the US and Japan, growing limitations on central-bank policy and stronger cash generation by gold-mining companies. In its latest GREED & fear report, the brokerage argued that a combination of rising government debt, higher borrowing costs, geopolitical uncertainty and improving fundamentals for miners is creating a supportive backdrop for bullion.

The firm’s assessment comes as US government debt crosses the $40 trillion mark and the country’s fiscal deficit continues to expand. Jefferies believes these pressures could make gold increasingly attractive as investors look for protection against macroeconomic and geopolitical risks.

Jefferies stressed the worsening fiscal position of the US as one of the key reasons behind its bullish view on gold.

US federal government debt has now exceeded $40 trillion, while the fiscal deficit accumulated during the first 10 months of the current financial year has already overtaken the total deficit recorded in FY25.

The US fiscal deficit reached $432 billion in July, marking the largest monthly shortfall since March 2021 and the biggest deficit ever recorded for the month.

Between October 2025 and July 2026, the deficit stood at $1.799 trillion. That compares with $1.775 trillion for the whole of FY25, highlighting the rapid deterioration in the government’s fiscal position.

Rising Treasury Yields Create A Policy Dilemma

The brokerage also pointed to increasing Treasury yields and the challenge they create for US monetary policymakers.

Higher interest rates can increase the cost of servicing government debt, putting additional pressure on policymakers as the debt burden expands. According to Jefferies, this could increasingly constrain the Federal Reserve’s ability to tighten monetary policy.

The brokerage sees a similar problem emerging in Japan, where fiscal pressures are also becoming more significant.

“The above fiscal issues in America and Japan, and the constraints they impose on monetary policy, are clearly bullish for gold,” Jefferies said.

The assessment suggests that growing fiscal strains could strengthen gold’s role as a store of value, particularly if policymakers face less room to respond to inflation and economic risks through conventional rate moves.

Iran Conflict Adds Another Layer Of Support

Geopolitical risks are another factor behind Jefferies’ positive outlook.

The brokerage highlighted continuing tensions involving Iran and the closure of the Strait of Hormuz, a strategically important route for global energy shipments. Disruptions in the region have added uncertainty to oil markets and increased concerns over broader geopolitical instability.

Jefferies believes oil and energy stocks currently offer the strongest hedge against these risks, while gold ranks second.

“Meanwhile, the price gap between crude oil and refined products, such as diesel, becomes ever wider,” the report said, adding that “investors need to own oil and energy stocks as the best hedge, with gold second best.”

Gold Miners Are Generating Stronger Cash Flows

Jefferies’ bullish thesis is not limited to the price of bullion. The brokerage also sees improving financial fundamentals among gold-mining companies as an additional reason for investors to consider the sector.

According to the report, gold miners are generating increasingly strong free cash flow at a time when free cash flow trends across the broader S&P 500 are moving in the opposite direction.

The free cash flow yield of the Philadelphia Stock Exchange Gold and Silver Index improved from negative 2.01 per cent at the end of June 2023 to 5.07 per cent at the end of July 2026. It currently stands at 3.74 per cent.

By comparison, the S&P 500’s free cash flow yield has fallen from 4.75 per cent in September 2022 to 2.67 per cent.

The widening gap between the two groups has further strengthened Jefferies’ case for gold-mining stocks.

“The spread between the Gold and Silver Index free cash flow yield and the S&P500 free cash flow yield increased from a negative 584bp in October 2023 to a positive 233bp at the end of July and is now 108bp,” Jefferies said.