Hyperinflation Driving Runaway Gold Price

"Après moi, le déluge" - King Louis

“Apres moi, le déluge.” - King Louis XV of France, 1757

After the disastrous French defeat at the Battle of Rossbach in 1757 during the Seven Years' War, during which France suffered a humiliating loss to the smaller Prussian army led by Frederick the Great, a distraught Louis XV was reportedly consoled by his powerful chief mistress, Madame de Pompadour, who is sometimes credited with saying the phrase to him. Whether uttered by the King or his mistress, the sentiment was the same: a fatalistic and callous dismissal of the long-term consequences of the defeat.

And “deluge” certainly appears apt in contemplating the hyper-inflationary policy of the Federal Treasury and Reserve Bank, which is really what the two main financial institutions of the United States Government has become. (The illusion of Fed independence now and forever shattered by Trump’s overt control over Fed management hiring and firing).

With the announcement by Treasury secretary Scott Bessent that the US In 2025, will need to refinance or repay $9.2 trillion in maturing government debt, the next phase of the hyper-inflationary race to the bottom for USD has begun.

But this is a problem severely compounded by Turmp’s Big Beautiful Bill (BBB).

There is the "normal" maturing debt (~$6 Trillion) that is the baseline problem; a steady stream of previously issued U.S. debt, from short-term T-bills to 30-year bonds that is coming due throughout the year as scheduled. While massive, this $6 trillion figure represents the predictable, business-as-usual side of Treasury operations that markets are prepared for.

But the BBB's immediate impact was the multi-trillion-dollar price tag that needed to be financed immediately. To do this without freaking out the long-term bond market, the Treasury has been forced to fund the BBB with an unprecedented flood of ultra-short-term debt.

Instead of one-year bills, the Treasury has been issuing a constant stream of Cash Management Bills (CMBs) and very short-dated T-bills (4, 8, and 17-week maturities).

This has created a frantic, intra-year financing cycle. The Treasury is borrowing money that must be paid back in a few weeks or months, forcing it to constantly issue new debt to pay off the maturing old debt from earlier in the same year. It's not a single wave of refinancing; it's a relentless, high-frequency churn of trillions of dollars.

The logic behind this is ostensibly to reduce the interest rate expense of the Fed because shorter term T-bills, typically one year or less in redeem-ability, have a lower and thus preferable rate. However, what is rather surprisingly ignored is the cost of refinancing maturing Treasuries into short term T-bills, since this necessitates an implied recapitalization of $17 trillion annually, which is an administrative tsunami and puts the Fed in an extremely vulnerable position, is there is a risk that no institutions who aren’t forced to will be interested in buying 10 years again anytime soon?

The deluge is accelerating. And now gold has reasserted its role as the safe haven asset for global investors.

Gold on Fire

Spot gold reached as high as $3,578.50, and was trading around $3,560 in early U.S. trading. Futures are also at record highs: December gold futures reached above $3,610.

The perfect chart that embodies the disaster unfolding in USD is the Spot gold chart with the M2 (Total USD Liquidity) as the red line. As the Fed effectively defaults to unbridled damage control mode as the Treasury drops the pretence of any control and essentially relaunches massive QE Forever.

Analysts continue to attribute this dramatic surge—not only to expectations of imminent Fed rate cuts and a weaker U.S. dollar, but also to broader safe-haven flows amid growing policy uncertainty.

This real-time spike in gold into the $3,500+ range—consistent with levels I’ve projected since 2010—validates the structural case we outlined. It proves that markets are reacting to tangible fiscal stress, monetary policy risk, safe-haven demand, and mounting evidence of hyper-inflationary fiscal policy

So where’s gold going? Here are three potential scenarios:

1. “Stabilized Real Yields” Scenario where U.S. Treasuries manage to absorb issuance without excessive yield hikes; the Fed maintains steady rates (doubtful).

In this case, gold may consolidate in a range of $3,400–$3,600 around current levels.

2. “Safe-Haven Panic” Scenario, where the Fed pivots to rate cuts as rollover stress intensifies, weakening real yields. (likely)

Gold could ascend toward $3,800–$4,200 within months.

3. “Fiscal Crisis Acceleration” Scenario, where Inflation accelerates, pushing real yields negative while political interference undermines Fed credibility. (probable)

Gold could rapidly escalate beyond $4,500, possibly breaching $5,000/oz over the next 12–18 months, if not higher, which would mirror historical crises—1970s-style fiscal dominances and runaway deficits—where gold soared multiple-fold in short order.

In fact, gold could receive a hyperinflationary quantum moment, since as the purchasing power of USD accelerates to the downside, it will take more USD to buy an ounce of gold, and thus the rise in the price of gold will mirror, nominally, the deterioration in US purchasing power as the Fed reacts to the flood with more fiscal water.

Could gold and Bitcoin $BTC swap places on the valuation scale? At the very least, gold could easily match Bitcoin pricing, since it is just as scarce and just as onerous to produce as Bitcoin, with one major caveat in its favour: Gold actually exists.

Après moi, le déluge: Part 2

In hindsight, the phrase is seen as grimly prophetic. Louis XV died in 1774, passing a kingdom riddled with debt and deep social inequality to his grandson, Louis XVI. The "deluge" did indeed come. Fifteen years after Louis XV's death, the French Revolution began in 1789, a violent storm that swept away the monarchy, executed Louis XVI and Marie Antoinette, and changed the course of European history forever.

To pretend the US, and so some extent by extension, the developed world, is not spiralling into a similar intensity of crisis is to be naïve; the next transformational moment will be with the passing of King DJT, which will set the stage for the official inauguration of the technocratic/right wing fundamentalist Christian white supremacist administration figureheaded by JD Vance.