On August 18, the total U.S. federal government debt crossed the 40 trillion dollar mark. Annual interest payments reached 963 billion dollars, exceeding defense spending by 200 billion dollars. Wall Street's old money understands that this bill simply cannot be repaid without dilution through inflation. Therefore, gold prices surged from $4,100 to $4,700. Within one week, global speculators poured 22 billion dollars into the gold futures market — this is not merely a safe-haven behavior but a collective rebellion against the dollar credit system.
On August 19, U.S. Treasury Secretary Bessent announced that starting September 9, the single repurchase ceiling for 10-to-30-year Treasury bonds would be doubled from 2 billion to at least 4 billion dollars, running through November 4, and deploying 950 billion dollars from the TGA account to support this operation. Upon the news, long-term Treasury yields briefly retreated, the dollar index fell to a three-month low, and gold prices broke through $4,600. However, 30-year Treasury yields quickly rebounded above 5.23%, and the market did not buy the Treasury Department's approach of lowering borrowing costs without resolving fiscal imbalances.
Analyst Xia Yingying at South China Futures noted that without AI technology being able to rapidly improve the U.S. fiscal revenue and expenditure balance, the relief of long-term bond pressure will only compel the U.S. to increase short-term bond issuance, further weakening rate-hike expectations and even raising the possibility of rate cuts. In the past decade, gold pricing logic was simple — real interest rates rise, gold falls; real interest rates fall, gold rises. But this time is different. Despite 10-year Treasury yields still above 4.7% and 30-year yields hovering around 5.23%, gold rose 5% in a single week and closed up for three consecutive weeks. The market no longer fears Federal Reserve rate hikes but rather whether the United States can repay its massive debt. Bridgewater's Ray Dalio warned that the U.S. fiscal situation has reached a turning point, recommending that portfolio gold allocation be raised to a maximum of 15%. The pricing power of gold has shifted from the Federal Reserve to the U.S. Treasury Department's balance sheet.
