Weekly Update: Why Every Portfolio Needs Gold
Good evening, and welcome to this week’s edition of Stealth Trades!
Gold has been a currency metal for over 5,000 years. It is the go-to safe haven investment.
But the real appeal of gold is the protection it provides against inflation. And in the next 10 years, we are going to see inflation ramp way, way up.
The culprit behind the coming rise in prices is the same one who always causes inflation. In fact, it is the only entity that is even capable of causing inflation.
I’m talking, of course, about the US Treasury.
Inflation is caused by one thing and one thing only: increasing the money supply. When more dollars chase the same number of goods and services, prices rise. This is basic economics. Yet the Federal Reserve acts shocked every time it happens.
You see, the federal government is incapable of living within its means. Despite taking 30% of our income, it has spent more money than it has taken in in each of the last twenty years. This figure – the difference between what they spend and what they take in – is known as the deficit. And it currently sits at nearly $2 trillion.
When someone doesn’t have enough money to pay their bills, they have two options: don’t pay or borrow money to pay.
America is no different. And every year she chooses the latter, adding trillions more to a national debt that will never be paid off.
That debt takes the form of treasury bonds. When a bank or individual buys those bonds, the government is borrowing money they will one day have to pay back. When the Federal Reserve buys the bonds, they simply print money electronically to purchase them and deposit those funds into government accounts.
This is what increases the money supply. And this alone is the source of our inflation.
But we have now reached what I believe is the point of no return…
Interest payments are now the government’s second largest expenditure. The figure below was through June. And it will exceed one trillion dollars in 2025.
We now spend more money on interest than we do on national defense. And this is entirely unsustainable.
Unfortunately, our legislators do not care. Even the ones who claim to continue passing spending bills that exceed tax receipts by trillions of dollars.
By 2035, interest payments will exhaust 100% of income tax revenue. So that 22% or 32% or 37% of your income you pay in taxes? They will need ALL of it just to service the debt on money they have already spent. And, unlike a mortgage or car loan, none of those payments go toward the principal.
World governments are taking notice. So are central banks. Even individual investors like me see the writing on the wall. The US is broke. And the situation is rapidly getting out of control.
Sovereign investments from countries like China are not going to US bonds anymore. Instead, they are choosing gold. And I believe you should do the same.
Gold is the only real money there is. It has been a currency metal since before Jesus walked the Earth.
The fiat paper money printed by Uncle Sam is dwindling in value. The US dollar lost a whopping 10% of its value in the first 6 months of 2025 alone. And as the debt continues to rise, it is only going to get worse.
As the deficit rises, the government has to borrow more and more money. At the same time, demand for treasuries is dwindling. This leaves only one solution… printing the money it needs to fill the gaps.
And, once again, we are right back where we started with soaring inflation and rising prices.
The only other option would be to default. But I can’t see Washington ever doing that. It would completely collapse the financial system. Retirement funds and bank reserves holding government bonds would drop to zero overnight. The US dollar would lose its reserve currency status. And foreign nations would economically penalize America any way they could.
Make no mistake, America will try to print this problem away. Because they won’t quit spending.
Even Elon Musk and his DOGE team, which supposedly had the full support of the White House, failed to push any meaningful savings through. In fact, the government voted to raise the debt ceiling by $4 trillion as soon as he left DC.
I don’t say all of this to scare you. By now you should know that I am not a doom and gloom profit. In fact, quite the opposite. I remain bullish on the stock market and American business in general.
But I have run the numbers eighteen different ways and see no other possible outcome. And the only way to protect yourself from the effects of inflation is by owning gold and other physical assets. That means precious metals like gold and silver, residential and commercial real estate, farmland and the like.
Gold is in the middle of a powerful super cycle. After breaking out of a 14-year base, it has surged from $2,000 in 2024 to $3,700 today.
In all likelihood, this is just the beginning. I expect to see gold at $8,000-$12,000 an ounce by the end of 2027.
Silver is also making a historic move higher.
There are a number of ways to gain exposure. You can buy physical gold and silver from online brokers like Apmex (I just placed an order this morning.) There are also exchange traded funds like GLD (gold) and SLV (silver) as well as mining stock ETFs like GDX (gold miners) or SIL (silver miners). I won both in my retirement account.
Either way, I believe every portfolio needs some exposure in the precious metals space.
Best wishes for your trading,
