Brien Lundin: Debt, Debasement, and Why Gold’s Bull Market Has Support - LinkedIn

AI desk brief

Brien Lundin argues gold’s bull market is being underpinned by the U.S. debt overhang and what he calls a return of the “debasement trade.” He says federal debt above $40 trillion and debt near 135% of GDP make sustained Fed tightening politically and fiscally difficult, even if policymakers want to sound hawkish on inflation. The key tradeable takeaway is that gold is increasingly being viewed as a hedge not just against inflation, but against sovereign balance-sheet stress and currency debasement.

Lundin contrasted today’s backdrop with the Volcker era, when debt was far lower and aggressive rate hikes were feasible. In his view, a sustained tightening cycle would sharply raise debt-service costs, leaving officials with little room to keep pushing rates higher; at best, he sees only a symbolic quarter-point hike as realistic. He also pointed to Treasury buybacks, noting that an increase in long-end bond buybacks from $2 billion to $4 billion was small in absolute terms but still read by markets as evidence of active yield management.

He said gold jumped about $180 on the Treasury announcement, with stocks, bonds, gold, and silver initially rallying before equities faded and metals held gains. Lundin highlighted that gold and the 10-year Treasury yield have been positively correlated since late June, which he interprets as yields rising on debt/deficit stress rather than healthy growth. Near term, the setup remains supportive for bullion and silver if debt worries keep pushing real yields and term premium higher, even if that relationship remains counterintuitive by historical standards.