August 2026 - Week 1 Edition
Treasury Rates are Relentlessly Climbing – Causing Higher Budget Deficits Each Year
Interest rates are relentlessly climbing higher all across the Treasury spectrum, from 2-year notes to 30-year bonds. This past Friday, the benchmark 10-year note closed at 4.75%, a new high for 2026, while the 30-year bond (the base rate for most mortgage contracts) closed at 5.27%, its highest level since 2007!
The Federal Reserve’s bigger concern is the rapid rise in shorter-term rates, which form the basis for the Fed Funds rate. This was the main focus of their Federal Open Market Committee (FOMC) meetings, which occur eight times per year, with the most recent meeting occurring July 28-29.
The 2-year Treasury note yield has increased by a full point in the past five months, rising from 3.365% on March 1 to 4.377% in late July, before dipping down to 4.304% on Friday.
The Fed left rates unchanged last week, as I predicted here in a recent column, “I doubt the new Fed chair wants to alienate the President so soon after taking office by raising rates going into election season, so I don’t expect any interest rate increases (or cuts) this week”, despite widespread predictions of a rate increase. Three of the 12 voting members of the FOMC wanted to raise rates last week. The new Fed Chairman Kevin Warsh called this debate a good old-fashioned “family fight,” with many pundits now predicting the Fed will be forced to raise rates soon, reflecting the realities of the bond market, which keeps pushing rates higher.
President Trump wants the Fed to cut rates before the election but the best he can hope for is that they will leave rates alone, not increase them going into the election. But what if the 10-year rate tops 5%? The 10-year rate came within a whisker of that level in late October 2024, at 4.997%. Having 10-year rates above 5% would tie the Fed’s hands. They would have to make a move to raise the Fed Funds rate higher.
If the Warsh-led Fed cuts the Fed funds rate now, as President Donald Trump wants them to do, that would fly in the face of the rising 2-year note and the rest of the Treasury bond rates. As of July 31, the national debt is nearing $40 trillion – it’s now $39.84 trillion – and likely to surpass $40 trillion by the end of the federal fiscal year on September 30. So, paying out the average 2-year rates of 4.3% and 10-year rates of 4.7% would cost $1.8 trillion in interest payments on the national debt (4.5% of $40 trillion).
Paying $1.8 trillion a year just to service debt amounts to 90% of the $2 trillion annual deficits we’re seeing each year – and these numbers will keep growing with each year’s deficit, plus any interest rate increases.
These are among the main reasons why we see gold returning to $5,000 or higher later this year and we are not alone. J.P.Morgan still sees a potential push to $6,000 an ounce for gold by the end of the year and even higher in 2027. In fact, while some major banks have slightly reduced expectations for gold, the consensus from UBS, Commerzbank, Bank of America and Citibank is that gold will reach $5,000 again by the end of the year. You’ve seen me write about buying on the dips, when gold and silver have declined; this is that time. Contact one of our professional representatives today and discuss the ways that you can invest in gold.
U.S. Readies More New Coin Releases Honoring America’s Semiquincentennial
History tells us that past 50-year anniversaries of America's founding in 1776 created a strong increase in collector and investor interest in the rare coin market. That's what happened in 1976, during America's bicentennial celebration and 50 years before in 1926. Now, the same is happening again.
Part of this boom comes from the gorgeous array of new coins minted for these celebrations - as we first saw in the Roaring Twenties period in 1926 and once again during the start of gold's first major surge - from $104 per ounce in the late summer of 1976 to $850 in early 1980.
In 1926, we saw Republican President Calvin Coolidge featured on the "sesquicentennial" (150th birthday) of America, in silver coin form. Now, we have seen a new array of gorgeous and historical new coins for America's 250th anniversary - our "semi-quincentennial." Many more exciting new issues are also on the way, including an 1804 dollar-design in a gold and silver medal set that will be released at the time of the World's Fair of Money at the end of August. Additionally, a new 1907-design Saint-Gaudens high-relief $20 gold coin and silver medal set are scheduled to be released in September.
To that end, the U.S. Mint has expanded its circulating coin bulk purchaser program that includes the 2026 semiquincentennial issues and the President Donald J. Trump golden dollar. Soon you will be able to get these coins directly from us even if unavailable at your bank.
One new 2026 coin, which has already been released, is a unique Liberty Bell-shaped $250 face-value, one-ounce gold coin and a companion $125 1/2-ounce gold coin, plus a 1/2-ounce silver medal which sold out quickly and is trading for a large premium. Those new products, along with a circulating legal-tender $1 golden coin featuring President Donald J. Trump, will definitely pique new interest in rare coins. The new Trump coin will be composed of 88.5 percent copper, 6 percent zinc, 3.5 percent manganese and 2 percent nickel. And, despite allegations from some in the press objecting to the President's face on the coin, it is not illegal to put a living person on a U.S. coin, nor is it unprecedented.
July Month-End Market Summary and 2026-to-Date
During July, three of the four precious metals rose in price, while silver retreated in price. The Platinum Group Metals (PGMs) had a better July than gold or silver but they are all down for the full year so far.
In the stock market, only the Dow rose in July (+1.2%), while two other indexes were off over 3% and the S&P 500 was nearly flat (-0.13%). Year-to-date, the small-stock Russell 2000 did the best (+18%) while the other three stock indexes averaged around 10% gains, a big reversal from past years, when Nasdaq and the S&P 500 (dominated by big tech stocks, often called the “Magnificent 7”) dominated the market.
A better measure of the metals this year might be calculating from February 28, the date the War with Iran began. Since then, gold and silver began to decline from their early-2026 highs, while crude oil began its rise. In addition, the U.S. dollar index (DXY) rose during the Iran war, but interest rates rose even faster.
These Treasury trends are particularly worrisome since short-term (2-year) Treasury rates are growing faster than long-term rates, and the 2-year rate is more influential in determining whether the Federal Reserve raises its Fed funds rate. Also, most of our national debt is financed by shorter-term bonds.
Gold rose $83 (+2%) in the first two trading days of August and while it has been trading relatively flat, it has established a $4,000 price floor and is showing the turnaround that I, and others, have been predicting. The last time gold closed below $4,000 was on July 13. Silver has performed even better, up $2.15 (+3.7%) in the past few days, and platinum beat them both, up $94 (+5.7%). Stocks are also performing better now, with the Dow up 3.6%, the S&P 500 up 3.3% and NASDAQ up 4.8% so far in August. Some of this strength could be due to yet another rumor of “peace” breaking out in Iran but we’ve heard that song many times already, and peace in Iran seems elusive. Gold is growing on more than news of continued conflict in the Middle East, specifically with Iran. There is a rising demand in Asia emerging from Chinese ETF buying, the start of a long-term gold accumulation program by the Bank of Korea and, as I reported last week, continued increases in gold buying by central banks around the world.
Metals Market Report Archive >
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