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Let me walk you through something that most folks haven’t wrapped their heads around yet — but it’s exactly what’s driving the market right now.
Federal debt is approaching $40 trillion. That’s a staggering number with more zeros than most people can picture.
But here’s the part that should really get your attention: Interest costs now consume a significant share of federal revenue, leaving less money for other priorities and making the debt harder to control.
Think about that for a second. When revenue can’t keep pace with interest costs and government spending, the Treasury has to borrow more. If policymakers continue down that path, pressure builds for further money creation.
That creates two massive problems at once. First, expanding the money supply can weaken the dollar — pushing people away from cash and toward hard assets.
Second, it can fuel inflation. Even if inflation cools a little, it can remain elevated enough to squeeze consumers and complicate interest-rate policy.
That’s why I think gold, silver, copper, palladium and platinum are positioned to become increasingly important safe havens. As confidence in paper currencies weakens, capital tends to look for assets with tangible value.
The Global Picture Makes It Worse
This isn’t just a U.S. problem. Other major economies are facing similar debt, deficit and currency pressures.
When governments around the world rely on borrowing and money creation to keep the system moving, the case for hard assets becomes global rather than domestic.
Here’s where it gets even messier for us: If foreign buyers pull back from U.S. Treasurys because they see greater risk in our debt load, somebody still has to buy those securities.
If the Federal Reserve steps in aggressively, it can create a circular trap — more bond purchases, more money creation and potentially more debt.
Unless the government can balance the budget — and I’ll let you decide how likely that is — this reality may not be fully reflected in the market yet.
Where I’m Putting My Money
The math is simple: When more dollars are created, scarce hard assets can hold their value. When inflation stays elevated and the dollar weakens, metals can gain a powerful tailwind.
Add in potential conflicts over interest-rate policy — including the possibility that rates remain higher for longer — and the pressure builds.
Persistent inflation limits the Federal Reserve’s options while continued borrowing keeps the cycle running.
I believe reality is going to start setting in. As more investors recognize the scale of the problem, precious and industrial metals could begin a significant rally.
I’m positioning accordingly, and I think you should understand why.
Geof Smith
Geof Smith TradingÂ
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.Â
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Disclaimer: Since 12/05/2024, the trading approach discussed today has published 66 trade alerts. 65 of 68 have returned as winning trades, for a 95.6% win rate. The average return per trade, winners and losers combined, has been 12.84% on an average holding period of 10 days. With a $5,000 starting stake, every trade targets about $841 in returns, and every trade you see today will be based on that $5,000 starting stake unless otherwise stated.
