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We will allow inflation to pay off our debt, which means that it is not repaid, but actually canceled, because the creditors are simply being cheated. That's exactly what's happening, and Trump is happy about it, right ? He loves to cheat creditors , right? He's the borrower, we're the debtor, and he's like, "Yes, we're going to scam everyone who was stupid enough to lend us money, because we're going to pay them back with money that's worth a lot less than what they lent us." So gold should grow against this backdrop, and it will.
I do n't know exactly when gold will shake all of this off and traders will start to get used to falling bond prices and rising yields, as they did throughout the entire decade of the 1970s . Bond yields have been steadily rising, and gold prices have been rising with them, and it will happen again.
The biggest risk for investors may not be the next move in gold or silver. This could be what happens when the cost of financing US debt starts to change the markets' view of the dollar. If the US debt reaches $50 trillion and the average interest rate approaches 5%, annual interest costs will be approximately $2.5 trillion.
This does not mean that the government will suddenly start paying 5% on every dollar of debt. Available Treasury bonds have different rates and maturities. But as older, cheaper debt is refinanced, higher market rates could gradually push up interest costs. This creates a problem that investors cannot ignore.
Peter Schiff argues that rising Treasury yields may increasingly reflect concerns about inflation, government borrowing and the size of the US debt burden, rather than simply stronger economic growth. This distinction matters. When yields rise due to a strengthening economy, higher rates can support the dollar, making U.S.
assets more attractive. But when yields rise because investors demand more compensation for inflation and fiscal risks, the situation becomes much more complicated. Higher Treasury bond rates affect the cost of borrowing for businesses, households, and the federal government itself. If refinancing becomes increasingly expensive, more government revenues have to be directed to servicing existing debt.
This can create a complex cycle. Higher borrowing costs increase interest payments. Higher interest costs could require new borrowing, and more borrowing could put additional pressure on bond markets. That's why gold also matters. Gold can fall when yields rise as bonds become more attractive compared to a non- interest-bearing asset.
But if rising yields increasingly reflect concerns about inflation and fiscal sustainability , investors may view gold differently—as a hedge against these risks. If you found this analysis useful, please like , subscribe, and share it with other investors who are following the situation. We are here to continue to bring you sharp analysis and opinions from those who truly understand what is happening.
Thank you for watching. So, initially, when we got weak employment data, gold went up. Gold rose by about $40-50. But when bonds started selling off, gold followed suit . You know, the stock market didn't collapse, but gold did. Gold traders are still concerned about rising bond yields. Although the probability of an interest rate hike has decreased significantly, this should be good for gold.
But this was offset by rising bond yields. However, again, this is not bad for gold. Bond yields are rising because inflation is rising and because investors are losing confidence in the US's ability to pay its debt honestly. Even the President of the United States says we won't do it. We will let inflation pay off our debt, which means it is not a payment, it is actually a waiver of obligations, because the creditors are simply being cheated.
That's exactly what's happening, and Trump is happy about it, right? He likes to cheat creditors , right? He's the borrower, we're the debtor, and he says, " Yes, we'll cheat anyone who was foolish enough to lend us money, because we'll pay them back with money that's worth a lot less than what they lent us." So gold should grow against this backdrop, and it will.
I don't know exactly when gold will shake all of this off and traders will start to embrace falling bond prices and rising yields in the same way they did throughout the entire decade of the 1970s . Bond yields have been rising all this time. And gold prices rose with it. And this will definitely happen.
The same thing happened with silver, although silver fell about 1% in the week. And today it closed just above $60, $60.37 an ounce. Gold mining stocks , however, held up well, you know, GDX fell about 0.1 percent, so barely, barely, almost unchanged for the week. And GDXJ fell a little more, a little more than half a percent.
But it was n't that bad. I invest in the expectation of a falling dollar. The dollar has n't fallen yet. The dollar index is still holding. We haven't gone into decline yet. The specter of higher interest rates supported the US dollar just as it depressed the price of gold. But just as precious metals traders will understand, higher interest rates or higher bond yields are not a “ bearish” factor for gold and silver.
Currency traders will understand that this is not a “bullish ” factor for the dollar. That these higher interest rates are a burden. They are debilitating for the US economy. In fact, more and more people are starting to count now. I did the calculations in my podcast. We have $40 trillion in debt, and, you know, it's growing rapidly.
We'll reach 50 trillion before you know it. And we pay 5% of this amount. This is a huge problem. Not long ago, rates were below 1%. The stakes were zero. Yes, debt wasn't a big problem. I remember specifically paying attention to Janet Yellen when she was Treasury Secretary, and someone asked her: Is debt a problem?
And her answer was, “No, that’s not a problem because the interest rates are very low. "Therefore, it is not expensive for us to service this debt." That was her answer. This is not a problem because we have low interest rates. Then I asked, " Okay, what happens when interest rates stop being low?" And what to do now?
Because there is no guarantee that interest rates will remain low. And this was especially important given the short repayment period of the public debt. And Janet Yellen knew about it. It wasn't as if we had locked in all these low rates for 30 years. No, we had a lot of short-term debt. Therefore, we were extremely vulnerable to what was happening now.
We are being called to responsibility. All those years and decades of impunity, where debts got bigger and bigger, and markets ignored it and gave us the privilege of low interest rates— that's what it allowed. This is what gave rise to complacency. That's what allowed people to say for so many years that the deficit doesn't matter.
Which doesn't matter how much money we borrow. Debt can skyrocket and it doesn't matter. This matters. And we are convinced of this now. In fact, it always mattered, even if the markets didn't notice. It mattered because we were laying the foundation for a future debt crisis. Peter Schiff argues that inflation could be a way for the US government to reduce the real burden of its huge debt.
His idea is that when the value of the dollar falls, the government can repay existing debt with dollars that have less purchasing power than when that debt was issued . But he sees a serious problem with this approach. According to Schiff, if the government is actually relying on inflation to make debt management easier, bond investors have reason to be concerned.
Treasury bonds guarantee payments in dollars, so ongoing inflation can reduce the real value of these future payments. Therefore, Schiff expects this way of thinking to put pressure on the bond market. If investors demand more compensation for inflation, Treasury bond yields could rise, driving down the prices of existing bonds.
He also argues that the consequences could extend beyond the bond market. Higher inflation and rising yields could put pressure on the dollar, increasing the appeal of assets like gold and silver as stores of value. His broader warning is that inflation does not actually eliminate debt. Instead, he believes it shifts some of the burden from the government to bondholders, depositors, and anyone else who holds dollars.
Let's get back to the interview. This news appeared today. So, Donald Trump was asked about debt. And I think the person who interviewed him reproached him for all the debt that had accumulated during his reign. One of his answers was that inflation would quickly pay off this debt. As if that's a good thing.
Like, hey, don't worry about the debt because we have inflation, and that's good because we'll quickly pay off our debt with inflation. Of course, as soon as I heard him say this, it reminded me of Dan Aykroyd's Jimmy Carter parody on Saturday Night Live, where he said, " Inflation is our friend." Because now Donald Trump has become friends with inflation.
Apparently, he decided that if you can't beat inflation, then join it. So now inflation is good, and one of the reasons it's good is that it will pay down our debt, which is especially important given how much debt it's accumulating. So inflation will quickly reduce the debt he has built up so quickly.
Because if debt is bad, and Trump apparently admits that inflation is bad, because he says ... that debt is bad, because he says inflation will pay it off for us. So, hey, don't worry, we got a " get out of jail free" card. Yes, we have a lot of this bad debt, but we are lucky that inflation will pay it off for us.
He clearly believes that debt is bad. Okay, then why keep building it up? Why are you waiting for inflation to do your job? Do your own work . Veto some of these expenses. Encourage Congress, while you still have Republicans in the House and Senate, to cut spending, and that will help do something about the debt.
No, he doesn't want to do anything about the debt except increase it and then let inflation solve the problem he helps create. Well, that's not what he went to the polls with. He ran on a promise to get rid of inflation. Inflation is bad. Of course, in the same interview he blames everything on Biden.
He said he inherited the worst inflation in history from Biden. Well, Biden inherited it from him. Inflation has a lag, which is why Biden got into this mess. If Trump had won the election outright, inflation in 2021 and probably 2022 would have been just as terrible. You know, he was lucky that he escaped in time, but he didn't inherit that from Biden.
Biden inherited it from him. And of course, although Biden's hands are not clean , because he helped create this problem when he was vice president under Obama. So, Trump can say that he inherited the inflation problem during his first term. He did it. He inherited that from Biden, but he made it much worse, and that's what Biden inherited.
In fact, at the end of Biden's term, annualized inflation rates were even lower than what we have now. So, Biden simply passed the inflation baton back to Trump, and now Trump will run with it until he passes it to whoever replaces him, which will likely be a democratic socialist. But when you're a bond investor and you hear the president talking about how great it is that inflation will reduce our debt or pay it off, what do you do as a bondholder?
You will sell. Why, why do you need this? Because in essence, the president is saying: “Don't worry about the debt. We're not actually going to pay it off. We will simply devalue it through inflation." You know, it will actually be rejected. Bondholders will simply be dumped. They won't get their money back because inflation will destroy the value of their bonds.
That's what Trump says. So if the president is actually issuing a warning, which is tantamount to a sell signal, he's telling everyone, "Hey, if you have bonds, you should sell them now because inflation will devalue them." How do you think this will be received in Peoria or, you know, throughout Japan, China or anywhere else where people hold our bonds?
This will not be taken well. The real issue isn't just whether Treasury yields are rising and gold is having another strong day. And that's because these higher rates tell investors about the cost of financing America's debt. If rate hikes increasingly reflect inflation and fiscal pressures, the relationship between bonds, the dollar, and precious metals could change.
Bonds may come under more pressure, while gold and silver may become more attractive as a hedge against declining purchasing power. Schiff's argument ultimately boils down to one point. Inflation may reduce the real burden of public debt, but that price does not disappear. It is transferred to someone else.
So, who do you think will bear this burden first? Do you think markets will react more aggressively due to higher Treasury yields , a weaker dollar, or stronger demand for gold and silver? Share your thoughts in the comments and tell us how you plan to invest in precious metals in the coming years.
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