Gold Rebounds to Record High as Washington's 'Titanic' Debt 'Sets Course for Iceberg'
Friday, 5/23/2025 11:10
GOLD BULLION held onto this week's sharp rebound on Friday, erasing last week's 4.3% plunge from record-high weekend prices as Japan's government bond panic worsened and the US House of Representatives narrowly passed President Trump's "one big beautiful bill" of tax cuts and higher spending.
Coming a week after ratings agency Moody's finally
cut its view on US Treasury bonds below 'risk free' AAA, and set to grow Washington's current debt of $36.2 trillion by $3.8 trillion over the next 10 years, the 1,116-page bill now goes to the Senate for amendment or approval.
"This is arguably the most significant piece of Legislation that will ever be signed in the History of our Country!" Trump tweeted on his Truth Social platform.
"We're not rearranging deck chairs on the Titanic tonight. We're putting coal in the boiler and setting a course for the iceberg," said Kentucky Congressman Thomas Massie, one of only two Republicans to vote against Trump's bill.
Washington's borrowing costs rose for the 4th week in a row as Treasury prices fell yet again following the weakest demand for an auction of new 20-year debt since February.
The price of gold in contrast reversed all of
last week's $140 plunge − the steepest such drop since June 2021 − to trade above $3325 per Troy ounce in London's bullion market.
That would represent a new
all-time weekly close for gold if held at London's 3pm benchmarking auction.
Japan's government borrowing costs today steadied in the bond market, close to the highest since 2008, after bad inflation data and forced selling by life insurance companies followed poor demand for a new sale of Tokyo's debt.
Gold priced in Japanese Yen today held around ¥15,340 per gram, down ¥200 from last Friday's record weekly close and 2.6% below its all-time spot-market peaks of the past month.
Tokyo's Topix index meantime rallied 0.7% from yesterday's 2-week low, ending the week 6.6% beneath last July's all-time high.
"Government bonds are supposed to be the safe asset class," says Ajay Rajadhyaksha, global chair of research at UK-based bank Barclays.
"But investors [in long-duration JGBs] have lost almost
20 per cent in just a few weeks."
Washington's bill brings increased US spending on defense, border patrol and deportation. It raises the level of personal and estate tax exemptions, as well as the amount of state and local taxes which can be offset against federal tax, and eliminates taxation of overtime income and tips.
The bill also tightens qualification rules for Medicaid and food aid, cuts subsidies to 'green' energy, and puts a 3.5% "excise tax" on non-citizens
sending money abroad, including those holding a green card or employment visa.
"I don't know who had America ending up with capital controls on their bingo card for 2025," says Mike Bird, Wall Street editor at The Economist magazine.
US residents sent more than $62 billion to Mexico last year, with a further $36bn going to India.
Trump's "big beautiful" bill also raises the US 'debt ceiling' − the legal limit for Washington's total outstanding borrowings − by more than 1/10th to $40 trillion.
"For the first time ever,"
says economist David Rosenberg following last Friday's ratings downgrade by Moody's, "the bonds of the world's reserve currency are no longer rated AAA by any major rating agency.
"The downgrade cycle is unlikely to end here. Not only does the USA have the weakest sovereign balance sheet of any other AA-rated countries on the planet, but the deficit and debt ratios are now practically the same as Egypt (rated B) and China (rated A+).
"Time to diversify further out of greenbacks and add more gold bullion to the portfolio."
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