Gold is often hailed as a hedge against inflation

Gold is often hailed as a hedge against inflation—increasing in value as the purchasing power of the dollar declines.

So if we look at what's happening with US debt and the likely outcomes, it's not hard to see why the price of gold could rise significantly in the next few years.

Last year’s budget deficit was nearly $2 trillion We’re already on track to have a deficit of the same size this year. All this spending is adding to the national debt of more than $36 trillion, an unfathomable amount of money. The situation is made much worse by the fact that $28 trillion worth of debt will need to be refinanced over the next four years, according to Federal Reserve data. The key problem is that this debt needs to be refinanced at a much higher interest rate than it was a few years ago. So when the Treasury Department refinances 28 trillion in debt, it is doing so at a much higher interest rate.

Many other countries and central banks that hold a large portion of the United States national debt want to invest in other assets. Several vocal BRICS countries have started using their own currencies in trade, reducing the share of the dollar in their trade and reserves. And even several European allies are exchanging their dollars for gold. This creates a dangerous situation because while other governments and central banks are reducing dollar investments, who is going to buy all those $28 trillion worth of bonds that need to be refinanced?

Ultimately, the Federal Reserve. We’ve seen before how the Federal Reserve buys government bonds with printed money. This leads to inflation. During the pandemic, the Federal Reserve printed $5 trillion, and inflation rose to 9.1%. Over the next four years, the Federal Reserve may be forced to print a large portion of that $28 trillion simply to help the U.S. refinance its debt.

What happens to inflation and the gold price then?