Major Precious Metals Investor: The U.S. Faces High Debt and High Interest Rate Dilemma, Bullish on Gold and Silver Long-term Market

Huitong Network, October 9— — Renowned gold investor Peter Schiff warned in an interview that the U.S. bond bear market is just beginning, mortgage rates could rise to 9%, and national home prices may tumble by 30% to 50%. He believes the U.S. is trapped in a high-debt, high-interest rate dilemma, with possibilities of debt restructuring or inflation diluting the debt. He is optimistic about the long-term outlook for gold and silver, allocating more personal funds to gold mining stocks, and emphasizes that the current market underestimates inflation pressure. He also notes that AI industry expansion will intensify capital competition and push interest rates higher.

Renowned precious metals investor Peter Schiff provided a striking forecast for the U.S. bond market, real estate, and precious metals markets. Recently, a sell-off wave in U.S. bonds has pushed U.S. financing costs to a 24-year high, and in his view,

As a gold bull who warned of the real estate bubble before the 2008 financial crisis, Peter Schiff believes He also shared his personal approach to asset allocation, investing more in gold mining stocks rather than physical gold bars.

The Long-term Bond Bear Market Begins: Rising Rates to Devastate U.S. Real Estate

Schiff stated that the decades-long bond bull market ended between 2020 and 2021, and a long-term bond bear market, lasting at least 20 years, is to follow, with rising interest rates possibly outpacing the declining trend of recent decades. The mortgage market will feel the policy shock first; he expects that in Q1 next year, the 30-year mortgage rate could rise to 9%, and national home prices may drop by 30% to 50%, with declines at least as severe as during the 2007-2008 housing crash.

In past decades, American homeowners could use refinancing to extract home equity for consumption. Schiff believes this era has ended. He said: "There is no longer room for home refinancing. The model for cashing out home equity no longer exists, and households have lost this crucial financial buffer."

According to the Mortgage Bankers Association data as of the week of October 2, the average 30-year mortgage rate has reached 7.49%, the highest since November 2023. The Federal Reserve chair also carried out the first rate hike since 2023 in September, further increasing pressure on market rates.

High Debt and High Rates Dilemma: U.S. May Face Implicit Debt Default

Schiff pointed out that the U.S. is currently located in a special quadrant of high debt and high interest rates. Previously, a low-interest environment facilitated high debt operation; now, the situation has reversed. He believes there are only two ways out for the U.S.: either rely on inflation for an implicit debt default or directly conduct debt restructuring.

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The Congressional Budget Office estimates that annual interest spending on federal debt has reached about $1 trillion. Schiff predicts, He also questioned the Treasury's bond buyback program, calling it similar to an operation twist—redeeming long-term bonds while issuing short-term treasury bills. If rates keep rising, this could have negative effects.

Long-term Outlook Turns Positive for Gold, New Approaches to Precious Metal Allocation

During periods of rising U.S. Treasury yields, spot gold prices once fell near $4,100 per ounce, a sharp drop from the all-time high above $5,500 earlier this year. The market generally believes that gold does not yield interest, and higher bond yields weaken its appeal. However, Schiff holds the opposite view.

He said: "Rising bond yields essentially reflect a collapse in bond prices, and bond investors face continuous losses. When investors sell bonds and withdraw funds, gold and silver will become important allocation targets, which is extremely bullish for precious metals." He cited the market history of the 1970s as an example, when both interest rates and gold prices rose together. The core criterion is whether interest rates can exceed inflation. He also predicted that silver is far from its top; $125/oz is not its final peak, and much upside remains.

Central bank gold purchases worldwide continue to support prices, with major Asian central banks increasing holdings in September, buying gold for 23 consecutive months.

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Personal Asset Allocation and Inflation Outlook

Discussing his personal portfolio, Schiff stated he allocates more funds to gold mining stocks rather than physical gold bars. He said: "I want to own gold resources still buried underground, "

For ordinary savers, he does not recommend U.S. bond funds; cash portions can be in money market instruments. He also offered practical advice: stock up on non-perishable household goods in advance to resist inflation eroding purchasing power.

Recent New York Fed surveys show that the American public expects inflation to be 3.9% in the coming year, the highest since May 2023. Schiff believes the market still underestimates how much further inflation will rise. AI industry expansion will also push interest rates higher, as big tech companies shift from U.S. Treasuries buyers to finance borrowers, competing with the U.S. government for market capital.

Conclusion

Peter Schiff’s entire forecast depicts the immense risks facing the U.S. high-debt system, with continued pressure on the bond and real estate markets. However, there are different voices in the market: recent 10-year U.S. Treasury auctions were decently subscribed, with a winning yield of 5.3%, the highest since 2000. Minutes from the Federal Reserve’s September meeting show officials unanimously agreed to raise interest rates, with most seeing more hikes likely this year. Schiff admits that technological progress boosting productivity is the only chance to break the deadlock, but the probability is low. The U.S. debt system is like a ticking time bomb, and it’s impossible to predict when the crisis will emerge.


Spot Gold Daily Chart Source: Easy Huitong

Beijing Time October 9 10:41, spot gold at $4,176.54/oz