Gold Moves First as Debt Reality Sets In
U.S. debt reaches $38.5 trillion as interest costs accelerate.
Gold tends to respond before crises fully surface, and recent warnings from inside the financial system underscore why. As government debt expands to $38.5 trillion, interest costs surge, and fiscal discipline erodes, the case for owning physical gold continues to strengthen — not as speculation, but as protection from structural risk.
That risk was underscored recently when JPMorgan Chase CEO Jamie Dimon again warned that governments cannot borrow endlessly without consequences. Speaking on his company’s earnings call, Dimon acknowledged that short-term conditions may appear stable, but emphasized that mounting deficits in the United States and abroad will eventually come back to hurt.
“The deficits in the United States and around the world are quite large,” Dimon said. “We don’t know when that’s going to bite. It will bite eventually because you can’t just keep on borrowing money endlessly.”
Those remarks come as U.S. government interest costs continue to explode. In the final three months of 2025 alone, the federal government spent $276 billion just servicing its debt. According to the Congressional Budget Office, the deficit totaled $601 billion in the first quarter of fiscal year 2026, and projections point toward a nearly $2 trillion deficit for the full year.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, warned that lawmakers remain behind schedule on funding decisions while borrowing accelerates. “Lawmakers should come to an agreement on appropriations that avoids increasing our debt even more,” she said, noting that interest costs are increasingly crowding out other priorities.
Interest expense has quietly become one of the federal government’s fastest-growing obligations. In fiscal year 2019, net interest totaled $375 billion. By fiscal year 2025, it had surged to $952 billion — a 153% increase in six years. Interest now rivals Medicare as one of the largest line items in the federal budget and accounts for more than 3% of national income.
This trajectory creates a dangerous feedback loop. As deficits expand, more borrowing is required. As borrowing grows, interest costs rise. And as interest consumes a larger share of tax revenue, confidence in long-term fiscal stability weakens.
One theoretical escape valve is monetary expansion — effectively printing more money to manage debt burdens. But history shows that debasing a currency to manage liabilities comes with inflationary consequences. As money supply rises, purchasing power erodes, and real assets like gold tend to benefit.
Another vulnerability lies in who holds U.S. debt. According to Treasury data analyzed by the Peter G. Peterson Foundation, the Federal Reserve holds approximately $4.5 trillion in U.S. Treasurys. Foreign governments remain major buyers as well, including Japan, China, and the United Kingdom. However, China’s holdings have declined significantly over the past decade, reflecting shifting geopolitical and financial priorities.
If foreign demand weakens further, the U.S. could face higher borrowing costs, downward pressure on the dollar, or both. Those dynamics historically support gold, which carries no counterparty risk and does not rely on confidence in government balance sheets.
Public concern is rising. A 2025 Peterson Foundation poll found that 76% of voters believe addressing government debt should be a top priority. Since then, the situation has worsened, driven in part by higher interest rates and increased spending commitments. Interest expense alone offset nearly 60% of recent gains from tariff revenue, highlighting how difficult it has become to stabilize finances once debt reaches this scale.
Dimon summed up the reality bluntly: “We have to deal with the world we got, not the world we want.”
For investors and savers, that world increasingly includes unsustainable debt, growing interest obligations, and currency risk. Gold does not solve those problems — but it has historically served as a store of value when confidence in fiscal systems erodes.
Reagan Gold Group: Positioning for Structural Risk
At Reagan Gold Group, we focus on physical gold and silver ownership as a way to help clients diversify beyond debt-dependent financial systems. Precious metals are tangible assets that exist outside banking balance sheets and are not tied to government borrowing or monetary policy. In periods of rising deficits, expanding interest costs, and currency uncertainty, physical metals have historically played an important role in long-term wealth preservation.
