Oil Surge Sparks Gold Pullback Warning: Interest Rates May Trigger US Debt Crisis

The US jobs report week is underway, but gold prices are soft due to the 'Tombstone Tuesday' phenomenon. According to Stewart Thomson of SilverTrade, gold has surged almost 20% in a month and broken out of its corrective channel. It's now staging a classic pullback towards the breakout point, targeting the $4300-$4200 zone.

Mainstream media focuses on the relationship between oil, interest rates, and gold. They claim that gold pays no interest, so higher oil prices bring Fed rate hikes, which are negative for gold. However, Thomson points out that even an 8-10% interest rate could put the government into a state of full default.

Thomson believes that when interest rates hike to this level, it will be 'Queen Gold' that forces the fiat-focused government into debt. If oil surges to $110-$119, let alone his long-term target zones of $200 and $300, US inflation will skyrocket, and the Fed will have no choice but to hike rates.

As a result, the government will face a difficult decision between massive spending cuts and printing money. History shows that when faced with default and bankruptcy, governments often choose aggressive fiat currency debasement.