China is steadily dumping US government bonds and buying gold instead, and Washington is now looking at gold as a way out of its debt hole — bad for the dollar, good for gold holders.

• China has cut its US bond holdings by more than half since 2012 and is putting the money into gold, buying 20 to 30 tons a month lately.
• The buying sped up after Russia's assets were frozen and again after the Iran conflict — gold in your own vault can't be seized.
• The US deficit has hit $2 trillion this year, with spending growing more than twice as fast as tariff revenue, so more borrowing is certain.
• Treasury Secretary Scott Bessent has brought in Judy Shelton, a gold-standard advocate, who wants US gold reserves revalued from their old $42-an-ounce book price and used as collateral.
• Her plan for gold-backed long-term bonds would let investors choose cash or gold at maturity — a good deal for buyers, a risky one for the Treasury and an admission the dollar is weakening.

Outlook: Central banks keep shifting from US bonds into gold, and if Washington joins them, gold demand and prices head sharply higher.