The markets got knocked silly yesterday by Jerome Powell’s ultra-hawkish testimony before Congress.

There wasn’t much good news in this sell-off, except for this: The argument for an eventual Fed pause and resulting surge in gold remains as strong as ever.

March 8, 2023

Dear Fellow Investor,

I feel like I’m stuck in a time warp.

After five days of listening to junior mining companies hawking their projects like carnival barkers...I’m now watching Federal Reserve Chairman Jerome Powell face another circus in the form of the House Financial Services committee.

The questions he’s facing run the gamut, from future rate policy to the likelihood of a recession to what the Fed can do for diversity, equity and inclusion.

Most of it is pure political pontification. One congressman didn’t even ask a question, instead using his entire time allocation for a campaign speech.

I know you know it’s nothing more than theater. But the fact is, Powell did say something substantive in his testimony before the Senate banking committee yesterday. He sent the markets reeling with his comment that rates are likely to end up even higher than the Fed had previously expected.

And that includes gold and silver. The yellow metal plummeted $33 and silver lost nearly a dollar.

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While Powell didn’t back off from yesterday’s comments in his responses to the House committee today, neither did he pile on with more body blows to the markets.

He’s maintaining that rates will likely be higher than they previously believed, but will, as always, be “data dependent.”

The U.S. stock market is still tumbling, adding more losses on top of yesterday’s shellacking. The good news is that gold and silver are up just a bit as I write, which is encouraging.

Perhaps investors are seeing what I’m seeing — the simple math showing that interest rates in the range of current predictions will be simply impossible to bear for long.

As you can see, if interest rates get into that 5% to 6% range that are now being forecast, we’ll be paying well over $1.5 trillion...and even close to $2 trillion...every year on the federal debt.

How will the Treasury pay that kind of interest? Simple: They’ll borrow the money.

So if we’re already running an annual budget deficit of around $1 trillion as a new baseline, interest costs alone will nearly triple that rate of debt accumulation.

As you can see, this will be a classic debt spiral. And one that will be so destructive that even the world’s reserve currency could not remain unaffected.

Again, this is simple math. And in the face of this, the Fed will be forced to halt its rate hikes well before inflation could get near to its 2% target.

Gold and silver will soar in that scenario. And I believe that scenario is simply unavoidable at this point.

I advise you to make sure you’re prepared.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference