Typically, we expect the price of gold to fall when yields rise. But over the last two months, Treasury yields and gold have surged together.
Precious metals have continued their march upward over the past week. Let’s take a look at where prices stand:
The price of gold rose to a new high at $2,749. See the current gold price here.
The price of silver was up 6.5% from a week earlier. On Tuesday, it was up over 10% to $34.86. See the current silver price here.
It is noteworthy to see how gold and silver are moving in tandem with Treasury yields. Markets have rarely seen this dynamic since the turbulent 1960s and 1970s. So why is it happening now?
Rising Treasury Yields and US Debt
When Treasury yields go up, it becomes more expensive for the government to borrow money. Treasury yields rise when people lending money to the US government demand a higher rate on their loans. Lenders may be concerned with things like:
- The US government is spending too much money
- Inflation — the price of goods and services rising too quickly
- An economy that is weaker than it appears
Gold Moves Alongside Treasury Yields
As we’ve noted before, rising yields are typically bad for gold. When yields rise, we expect gold to fall as investors favor assets with higher interest payments. But in 2024, gold continues to surge amid rising yields.
The price of gold goes up when people worry about economic or monetary stability. It acts like an insurance policy that protects a portfolio from the erosion of purchasing power.
So, even though the government is trying to keep interest rates low, rising Treasury yields and gold prices serve as warning signs. They’re telling us that “smart money” is getting a bit nervous about underlying inflationary pressures and the government’s ability to pay its debts.
US Debt Outpaces US Revenue
In 1981, the US national debt moved above $1 trillion for the first time ever. We had double-digit interest rates back then, and $142 billion was the interest paid back on the debt — or 2% of the US GDP.
Today, the US debt has reached $35.78 trillion, and our servicing on the debt has reached 4% of the nation’s GDP. That’s the equivalent of 30% of the revenue the government collects from your taxes going to pay off the interest on US debt.
Neither of our current presidential candidates are keen on ending their careers with fiscal restraint.
Trump aims to extend his 2017 tax cuts and further reduce the corporate tax rate, remove taxes on Social Security benefits, tips, and overtime pay, and potentially reduce the corporate tax rate to 15% for companies with US-based manufacturing. However, his plans could expand the national debt by trillions over the next decade, due in part to his reliance on new tariffs that could hinder economic growth if foreign nations respond with retaliatory tariffs.
Harris has campaigned to cut income taxes for lower-income households, boost housing tax credits, child tax credits, and health insurance tax credits. Harris’s policies are expected to increase the national debt by about $3.5 trillion over ten years because of increased spending on social programs.
Add Gold to Your Personal Economy
Consistent, regular acquisitions of gold and silver can protect against political and economic uncertainty. When you own real gold and silver, you can protect your purchasing power and guard against outsized government spending.
With Vaulted, you can put your acquisitions on autopilot through VaultPlan. You set the desired amount, date, and frequency (up to twice a month), then Vaulted handles the rest. All you need to do is log into your account, set up your plan, and sit back while VaultPlan grows your savings.
