The Biggest Mistake Gold Investors Are Making Right Now

“They don’t make kids like they used to.”

That was my comment to my wife, Yulia, the other day as we drove back from the local farmer’s market here in Braga, Portugal. Subject: Our kid’s inability to detach himself, of his own accord, from his tablet computer and go outside and learn about the world by exploring the forest near our house. Or just riding his bike around the neighborhood.

When I was a kid… my friends and I left the house every summer morning by about 9 a.m, and we returned when the streetlights came on. We got up into all kinds of hell… and had a blast doing so. Parents didn’t care; we were out of their hair the entire day.

Now this might seem like a strange way to segue into a story about the challenges today’s Federal Reserve faces, but there is linkage here.

See, the modern Fed, like modern kids, is soft.

It doesn’t have callouses on its hands. No bloody knees. No scrapes and bruises and shirts stained with mud from chasing snakes and turtles through Devil’s Creek.

As an institution these days, the modern Fed instills the same level of fear as a Chihuahua yapping and thinking it’s a big dog.

Which is why… the gold market does not face the risk that investors seem to think it faces.

I see a lot of shallow thinking in the financial press and on social media platforms right now about the long-running gold bull market facing an existential threat because the Fed will likely have to raise interest rates to deal with inflation.

In textbook terms, that’s understandable. Inflation means higher interest rates, which means bond yields go up, and because gold offers nothing by way of interest or dividends, then why own gold when you can own an investment that offers a return?

Sound thinking, sure.

Then again, the textbook wasn’t written when America had more than $39 trillion in debt.

The fly in this mental ointment is this: The yield on the 10-year Treasury has basically tripled to more than 4.5% today from about 1.5% in early 2022, so if the textbook is right, then we would expect gold to sink.

So, what did gold do?

It rose to a high of nearly $5,600 per ounce from about $1,800 over that same period.

Bonds have been paying more for four years running.

Gold didn’t notice.

Now, savvy investors will call me out and say that gold responds not to nominal bond yields, but to something called the “real yield”—bond yields minus the rate of inflation.

Ok, let’s go there…
January 2022: Real yield based on 10-year TIPS (Treasury Inflation Protected Securities) is about -1.0%—deeply negative. Gold stood at roughly $1,800.
October 2022: Real yields climb to roughly +1.5% as the Fed starts hiking aggressively. Gold drops to around $1,620—one of the few genuine pullbacks of the bull market.
October 2023: Real yields approach +2.5%—the highest since before the 2008 financial crisis. Gold at roughly $1,980 has actually moved up even as real yields touch 15-year highs.
Early 2025: Real yields hit a cycle peak of roughly +2.6% before pulling back. Gold by this point is already above $2,700 and accelerating.
Today (June 2026): Real yields sit at roughly 2.1%—below the early 2025 highs. Gold most recently traded around $4,300 after pulling back from the $5,598 January high.
Apparently, the textbook is simply wrong.

Or just maybe… there’s something else afoot?

Hint: There is, and it returns us to the original thesis: The Fed is soft.

The something else that is afoot is the $39 trillion in debt I mentioned a moment ago, which today’s nervous nelly investors are willfully ignoring.

Paul Volcker, the former Fed chair, famously killed inflation by hiking interest rates in America to more than 20%. In doing so, he pushed real interest rates to more than 10%… easily enough firepower to take out the gold market.

But revive the ghost of Paul Volcker and time-shift to today: What would happen in America if the modern Fed tried to kill inflation by driving up the Fed funds rate so that real yields are about 5% rather than 10%? How does that play out?

Horrifically bad is the answer.

To generate real returns of 5%—the kind that might actually give bond investors a compelling reason to abandon gold—the Fed would need to push the funds rate to roughly 9%.

The 10-year Treasury would likely trade north of 11%. That’s factoring in the fiscal risk premium that would immediately attach to a US government visibly drowning in $39 trillion of debt at those rates.

As the existing debt stack rolled over—about a third of it reprices every year—annual interest payments would climb from today’s $1.3 trillion toward $3 trillion or more within three years.

Meaning, Paul Volcker’s ghost can go back to sleep now because there’s not a remote chance that the Fed raises interest rates beyond a token quarter percentage point. The US economy and America’s fiscal situation cannot absorb that shock the way the late-70s and early80s did—an era with minimal government and consumer debt.

So we come to our takeaway: The textbook is wrong, and investors who have been dumping gold are as mentally soft as modern kids.

Investors have freaked out in response to Trump’s war in Iran and the inflation sparked by higher energy prices. They worry about a “Fed is gonna hike” narrative that they think is going to undermine gold.

But just connect the dots.

When you realize the impact that higher rates—meaning rates that produce a real yield—will have on America’s debt-repayment situation, then the only conclusion you can come to is that the gold bull market is far from over.

Gold is down because retail investors are misreading the tea leaves.

But you know who’s reading them correctly?

Central bankers.

They’ve continued to buy gold at an aggressive pace, even as the price has come down.

Who to follow?

Nervous investors who aren’t connecting the dots? Or central bankers who are sending a message that all is not well? (It’s one of the reasons we’ll be spending so much time discussing gold, currencies, debt, and the shifting global financial landscape at this year’s Future of Wealth Summit in Dublin. Understanding what’s happening is one thing. Knowing how to position yourself for it is something else entirely.)

Gold doesn’t need the Fed to fail in its efforts to attack inflation. It needs the Fed to be trapped. And trapped is exactly what $39 trillion buys you.