Trump Wants To Eliminate The Debt Ceiling And Drive Gold Much Higher

This week had key events that are setting gold up to have a stellar year in 2025 much like 2024. The Fed met and decided to cut interest rates by a quarter-point, while also saying that their projections on inflation have “fallen apart” which is why they had hawkish commentary. Then the politicians did their thing of arguing over funding to keep the government open.

The fallen apart comment didn’t seem to get a lot of attention, as it should have. Likely because Powell went with the narrative that the jobs market is cooling in a gradual way, but the economy is healthy and their rate policy is right on the money.

Another issue that didn’t get much coverage by the financial media was their 2025 projections for economic growth and inflation. Even using the highly manipulated government statistics, they are anticipating growth at significantly lower than inflation. Of course, they didn’t call it stagflation which is exactly what they are describing with their estimates.

Only a few of the members of the committee plugged into their models what they see happening with the Trump administration. As the politicians were fighting over the continuing resolution to keep the government open, signals of what is to come were flashing signals that should be heeded.

Initially, the politicians came out with a gigantic bill supported by both sides. But, then Elon Musk got on X.com to voice his opposition to the insane spending which caused an uprising. This sent a clear message to the politicians that folks weren’t pleased and the politicians had to go back to the drawing board.

They got their message across, but what stood out was that Trump also wanted them to entirely scrap the debt ceiling. Which showed his true colours, that once he gets in power he wants to spend without restrictions.

Ultimately, the politicians came out with a smaller bill in pages, but, not much difference on the spending. It passed and they kicked the can down the road until March, when it looks like Trump will take another run at getting the debt ceiling eliminated. And let the spending begin.

It isn’t likely that the marriage between Elon Musk who wants to slash spending and Trump who loves to spend like a drunken sailor will last long. The tension will only grow as people are calling Elon, President Musk, which will not sit well with President Trump.

Trump hasn’t even taken office yet and the potential for friction between billionaires Musk and Trump are increasing. It will only get worse. Trump will certainly see that Elon could be the people’s president due to how he can get folks worked on X.com. Elon caused more of a ruckus in Washington than Trump could with his own sabre rattling.

Elon was able to get the politicians to go back to the drawing board, but Trump was unable to get them to agree to eliminating the debt ceiling.

When Trump gets back in office, he will want to score some early wins. One of his campaign promises that he will likely want to move on right away is on tax cuts. Which will make the deficit worse because he won’t have a way to pay for them.

He will also want to fulfill his campaign promises for mass deportations, which will slow the economy and increase inflation as cheap labour will drive up prices.

A third pillar that feeds his ego is getting tough on trade wars by increasing tariffs. Which he sells as being paid for by importers, when in reality it is paid for by consumers that see the cost of tariffs paid for by them. If the Fed is already worried about their inflation projections falling apart, inflation will get much worse when Trump cranks up tariffs.

Which brings us to spending, Trump showed his hand when he asked for elimination of the debt ceiling. He doesn’t want restrictions with that pesky debt ceiling getting in his way. Meanwhile, Elon wants to slash spending, which will ultimately be the grounds for divorce between Musk and Trump when it comes time to transition from campaigning to running the government.

Just prior to the election, gold peaked on the futures market at $2800 and then came under pressure when Trump got elected, which saw it drop to just below $2600. Traders seemed to believe the campaign rhetoric, despite all the evidence that there is a big difference between promises made to get elected and what happens when politicians get into office.

Traders bought into the campaign promises that Elon would be able to slash spending, but this scuffle over the continuing resolution this week showed that politicians on both sides of the aisle love spending and increasing the debt. That won’t change.

Inflation that is stickier than the Fed hoped for and the tariffs could definitely cause stagflation to grow much more significantly. The last time there was stagflation in America it was extremely bullish for gold.

Many seem to believe that Trump has seen the errors of his spending ways during his first term and think he has got his spending addiction under control with the help of Elon. But, his push for elimination of the debt ceiling shows that he hasn’t. Which means that he will spend like never before and run up the Death Spiral of Debt, which has the straw that will break the debt camel’s back being the cost of servicing the debt. Which is ultimately, why gold is in a powerful gold bull market to start with.

His plans to cut taxes without paying for it, will also increase the deficit which very well could reach $3 trillion for each year of his four years in office and get the debt close to, if not above, $50 trillion by the time he leaves office.

If he follows through with the tariffs and deportation, it will lead to a second wave of inflation that could be worse than the first wave of not so transient inflation. Which means that the Fed won’t be able to cut rates much and may have to increase them. Even though they know that will throw workers and the economy under the bus.

WIth debt on a path to $50 trillion in the next four years, and interest rates at 4-5%, it means the cost of servicing the debt will reach $2 trillion before we know it. Which will only add fuel to the fire of the gold bull market.

During 2024, we saw gold go from the bottom left of the chart to the top right, and everything is shaping up for 2025 to be much like 2024 for the price of gold.

China is back to officially buying gold, they likely never stopped, but have been happy to take advantage of the recent softness to hoard more gold. They also have a way of influencing others inside and outside the BRICS nations to do the same.

At the end of the day, the gold bull market is all about the debt fiasco in America and throughout the world. Central bankers, and individuals that increase their gold holdings are making the right moves to put themselves on a Gold Standard.

Get gold, while the getting is good. For those investors that want to leverage up their exposure to gold, the best in breed gold miners, developers with high-quality mines of the future and explorers with important discoveries will get them the best bang for their bucks.

All the best,

Allan Barry Laboucan