--- title: "US Fiscal Policy Enters a Phase of Passive Austerity; Gold's Investment Logic Shifts from \"Trading\" to \"Asset Allocation\"" type: "News" locale: "en" url: "https://longbridge.com/en/news/295349216.md" description: "The article points out that US fiscal policy may be entering a phase of passive austerity, primarily driven by reductions in government employment and political factors surrounding the midterm elections. This shift impacts major asset classes: it is unfavorable for the US dollar exchange rate, and the investment logic for gold is shifting from short-term trading to long-term asset allocation" datetime: "2026-08-10T02:30:42.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/295349216.md) - [en](https://longbridge.com/en/news/295349216.md) - [zh-HK](https://longbridge.com/zh-HK/news/295349216.md) --- # US Fiscal Policy Enters a Phase of Passive Austerity; Gold's Investment Logic Shifts from "Trading" to "Asset Allocation" **Last Friday night's non-farm payrolls report shocked the market.** US non-farm employment decreased by 23,000 in July, with an unemployment rate of 4.1%. This was weak data, but also controversial. There was extensive discussion overseas over the weekend. The author believes one point is worth noting: **US fiscal policy may be entering a phase of austerity.** **First, let's raise a question: Do you think the significant contraction in government employment this month is a one-off phenomenon?** Clearly not. Since Trump took office, the reduction in government employees has been a continuous trend, related to shrinking government budgets. However, the contraction in government employment this month was particularly large (-53,000), drawing more attention. **In recent years, there has been a reliable pattern in US fiscal policy: a "fiscal window period" occurs every third quarter.** Significant spending takes place in the first three fiscal quarters (October to June of the following year), leading to a phased "fiscal window period" in the last fiscal quarter (July to September each year). Based on this year's budget data, the utilization progress of the US fiscal deficit in the first three fiscal quarters has reached 88%, indicating severe front-loading of fiscal spending. **Due to this phased fiscal window, US economic data and government employment tend to weaken temporarily in the third quarter, which is an interesting phenomenon in the era of Modern Monetary Theory (MMT).** Looking at the longer-term trajectory, the midterm elections will inevitably come into focus. **How do the midterm elections affect US economic policy and the US dollar exchange rate? The author believes one thing is certain—US fiscal policy will enter a phase of passive austerity.** Because Trump's approval rating has hit a new low (39%), it is highly probable that the Republican Party will face unfavorable conditions in the midterm elections. Losing the House of Representatives or a sweep of both chambers would make fiscal expansion in the US particularly difficult in 2027-2028... **Therefore, marked by the midterm elections, US fiscal policy is likely to enter a phase of passive austerity.** **Seeing the big picture from small details, US fiscal policy may be entering a phase of austerity. What does this mean for major asset classes?** The author identifies several points: **1\. Passive fiscal austerity is unfavorable for the US dollar exchange rate.** In our previous article, "Re-thinking the Framework for the US Dollar Exchange Rate," we mentioned that the US dollar exchange rate has two long-term drivers: "Technology + Fiscal Policy." Technology acts as an upward driver for the dollar, while fiscal policy acts as a downward driver. **As these two forces evolve marginally, the full-year high for the US Dollar Index may have already been seen mid-year.** **2\. Gold is shifting from short-term logic to long-term logic.** In the current macroeconomic context, the entry of US fiscal policy into a phase of passive austerity is definitely bullish for gold. **Long-term distrust of the US dollar will resurface, with accelerated central bank gold purchases being a typical example**—recently, countries such as China and South Korea have again increased official gold buying, and allocation funds are re-entering the gold market. WGC data shows that the current average daily trading volume in the global gold market is $370 billion. Excluding the impact of gold prices, market trading volume has roughly fallen back to levels seen in early 2025. **From this perspective, the deleveraging in the gold market during this cycle should have come to an end.** The key focus moving forward is whether a "weak dollar + strong gold" cycle similar to last year will develop and intensify. If so, the market performance in the second half of the year could be even more promising. Summary of today's sharing: 1. Last Friday night's non-farm payrolls report shocked the market. Seeing the big picture from small details, the author believes one point is worth noting: US fiscal policy may be entering a phase of austerity; 2. In the short term, due to the significant front-loading of US fiscal pacing, the third quarter is a "fiscal window period." In the medium term, Trump's approval rating has hit a new low, making unfavorable election results highly probable. **Marked by the midterm elections, US fiscal policy is likely to enter a phase of passive austerity;** **3\. Regarding major asset classes, passive US fiscal austerity is unfavorable for the US dollar exchange rate.** The full-year high for the US Dollar Index (101.6) may have already appeared mid-year. **Gold is shifting from short-term logic to long-term logic.** The key focus moving forward is whether a self-reinforcing "weak dollar + strong gold" cycle similar to last year will occur. If so, the market performance in the second half of the year could be even more promising. Risk Warning and Disclaimer The market carries risks; invest with caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. 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