Only 1 Factor Drives Gold Higher…

Just sitting here at my desk, whipping up a tweet to comment on gold relative to stocks and bonds, and I look at my trading screen and there’s gold, surpassing a new high above $2,940.

Frankly, I now think my base-case gold price of $3,250 for 2025 might be too conservative.

But I guess the more relevant topic today is: Why is this happening, El Jefe?

Well, using language far more polite than what my evil twin posts over on Twitter, gold’s incessant push higher is predicated on one factor: fear.

Fear of the reckoning America and the world are blithely sailing into.

So far this year, gold is up more than 9%. It has hit eight new record highs!

Stocks, as measured by the S&P 500, are barely up more than 2%.

Treasury bonds are flat.

There’s a message in that, and the message is: “Hurry up, Matilda, the s***show’s about to start!”

Sure, there are some people—traders—who are simply betting that a golden object in motion tends to stay in motion and will rise higher. But the base reason most people have been buying gold over the last quarter century (when gold began its move from $250 to where we are now) is financial protection.

The proof is in the fact that gold sloughed off America’s high interest rates.

Historically, high rates would send gold into a slumber. Gold pays no interest, earns no profits, and distributes no dividends. It sits in a vault. That’s the entirety of gold’s skillset.

So why would any rational thinker trade dollars for gold when dollars in a bank are earning 3% to 5%? Makes no financial sense.

True, grasshopper. But it makes a lot of fiscal sense.

Part of our job is to protect our financial nest egg, and our lifestyle, as best we can. That means assessing the world around us and tracking the vultures and black swans that could fall from the sky without warning and wreak havoc on the financial landscape.

Right now, the gold market is telling the world that the biggest risk on the horizon (and it’s more of a sure-thing than a risk) is America’s decaying fiscal condition.

Lots of Americans tune out talk of sovereign debt and deficits and how much the government pays in annual interest on its bonds. And for very good reason… it’s dull! It’s boring. It’s the Ambien of polite conversation.

No one wants to think about it because:

1. The numbers in question are so large that no one can wrap their head around them. I mean, what’s the difference between a million, a billion, and a trillion? Best most people reckon is that they all start with different letters. But think about it this way. If your 10-digit phone number represents a “million,” then you’d need to memorize a 1,000-digit phone number if it were stated in “billions,” and a 1-million-digit number if it were “trillions.”

• Handwringing about America’s debt has been part and parcel of the American experience since before Reagan… and America is still kicking today. So why worry about a worry that has been worrying worrywarts for five or six decades or longer?

I’ll refer back to a story you likely know about the turkey that is cared for every day. He has food whenever he wants it. He ranges free across the farm. He’s living his best life as a gobbler.

And then late autumn rolls around… and the turkey’s languid days have surprisingly turned into a 350-degree sauna for three and a half hours of unwanted roasting.

In other words, there’s no reason to worry… until there’s reason to worry.

And at that point, you’re just a once-fat-and-happy turkey roasting, headless, in an oven.

That’s what the gold market is telling the world with a price now closing in on $3,000.

The market is telling us that crisis is a’brewing. That current debt levels are simply unsustainable, particularly in the US (which has the world’s largest-ever pile of debt)… but elsewhere as well. A reckoning is on the way because a reckoning is the only way to reset the distortions that plague government, finance, and society.

I know people get tired of hearing it, but we are in the Land of Crisis already, given that there’s no way to reverse the debt without extreme levels of austerity, to which no politico will cotton.

It’s just that the early phases of a crisis can roll on for a long period because governments and bureaucrats keep pulling and pushing on this lever and that to shift the distortions from here to there as they bide time.

At some point, though, the pushing and the pulling no longer work. The levers are broken. There’s no more shifting. Or it could be that the Oompa Loompas pulling those levers and shifting the distortions make a cataclysmic miscalculation… and we get a financial Chernobyl.

Whatever the case, gold is going to be the answer to “How do I protect myself from this financial disaster?”

That’s what the gold market is saying.

That’s what I’m saying.

Buy gold.

Thank me later.