Gold, copper and real money
Gold sits near $4,400 and will go higher. Copper looks cheap when priced in gold, which is real money. Many people watch the gold-copper ratio. Copper has been very low against gold. Some thought gold would fall to close the gap. The opposite is true: copper will rise to meet gold. For copper to reach its historic average while gold holds at $4,400, copper would have to climb above $11 a pound - a 60% rise from now just to be a normal price, not expensive.
Everything bought with Federal Reserve notes costs more, not because goods get pricier but because the currency loses value. Buy with gold and prices fall, including copper. Since gold keeps rising, copper is heading much higher. Copper can jump sharply without becoming expensive if the money measuring it loses buying power. The risk is not an industrial metal bubble; it is currency debasement. The split that matters for investors: nominal gains versus real buying power. Commodities can surge simply because dollars buy less.
Broad commodity strength
The same move is coming for nickel, zinc, tungsten, cobalt and other industrial metals, plus energy and farm commodities. Copper stocks are hitting 52-week highs; those that haven't were still up big and will move higher. Agricultural names are rising too.
Soaring copper and oil prices do not fit a Fed that still believes inflation is heading to 2%. Inflation never got down to 2%. This means the CPI the government points to, not real inflation, which is money-supply growth. Consumer prices have risen above 2% for 65 straight months, more than 5 years. If inflation could not reach 2% while oil prices were falling, it cannot reach 2% while oil is rising. Scott Bessent said on Sunday shows that oil would fall to $50 or $40 a barrel once the Iran war ends. That claim is a lie, matching how the whole administration operates.
The Fed's rate trap
The Fed will always find a reason it didn't hike, then point to some number giving hope that inflation is trending to 2%, while promising to raise rates if data runs hot. It will threaten to hike and not do it. A 25 basis point hike buys nothing - too small to touch inflation. Hikes need to be much larger. If the Fed does raise 25 basis points, the market will just price in the next one, forcing another hike. The Fed stays stuck in the same spot, only with higher rates. That means bigger trouble for stocks, real estate and federal debt.
Debt and refinancing
Annual interest on the national debt now runs over $1.2 trillion. By the time Trump leaves office it reaches $2 trillion even if rates hold, because of debt rolling over and new borrowing. The government borrows over $3 trillion a year. The national debt is just over $40 trillion now. Official projections put it around $47 trillion when Trump finishes. A serious recession in the second half of his term could push it to $50 trillion. Over the next 2.5 years that adds another 7 to 8 trillion, all needing interest.
Old notes and bonds paying maybe 50 basis points must be refinanced at today's much higher rates. If the Fed hikes, the problem compounds. Refinancing cheap debt at current rates speeds up interest costs even without new borrowing. A recession makes it worse, hitting exactly when tax revenue falls and spending rises - a dangerous setup for bondholders and dollar savers.
Inflation data and gold's reaction
PPI comes Thursday, CPI Friday. Both could run much hotter than expected. If so, expect serious damage in the bond market, then the stock market. Precious metals typically fall on such pressure: gold dropped 46 dollars, closing at $4,358, driven by weak bonds, strong oil and strong copper pushing up rate-hike odds for next week.
If inflation comes in cooler than expected - still bad, just less bad - gold will soar and September hike odds will crash, because the Fed gets the excuse it wants to avoid hiking. Rate hikes are probably never truly on the table. Either way the Fed keeps political cover to avoid tightening. Trump still demands rate cuts and threatens to harm the economy if the Fed refuses. Watch policy incentives, not headlines.
Tariffs and trade
Tariffs cut trade with China without cutting America's dependence on foreign production. Americans were consuming heavily by outbidding everyone with a strong dollar. Tariffs made it harder to outbid because buyers had to pay even more and couldn't afford it. China simply trades with other countries and now runs a record trade surplus, even though its surplus with America shrank. It still holds a surplus with the US, just a smaller one. America still loses to China; China wins bigger elsewhere.
The winners are consumers in other countries who can now buy Chinese goods Americans used to take. Americans lost those goods and did not start making them at home. They just buy from somewhere else. The US goods trade deficit in 2025 was worse than 2024 despite tariffs. It has improved slightly in 2026, but extrapolating the current rate gives only a minor improvement over last year's record-bad figure. This counts goods only, not services, where the US always runs a surplus that Trump ignores.
Tariffs raised Chinese goods costs most, so Americans switched to goods from other countries. They did not rebuild manufacturing. Changing suppliers differs completely from rebuilding productive capacity, and inflationary pressure can persist even as China trade numbers improve.
Who pays the tariffs
Other countries charge more than China did; if they were cheaper, Americans would already have bought from them. China offered the best deal, which is why the deficit with China was so large. With tariffs, Americans take the next best deal at higher prices. They did not quit China cold turkey, because even with the tariff China was often still the cheapest, showing how efficient it is. So China's surplus survived: Americans bought fewer Chinese goods but paid much more. Some Americans switched suppliers and paid a bit more; some just went without. Americans lost the trade war with China. They will lose against Canada and any nation targeted, because America is the buyer that benefits.
Deficits, surpluses and consumption
A surplus is better than a deficit because the nation earns money, like a company making a profit. A surplus nation invests it: buying land, commercial property, farmland, equities and stakes in businesses, then earning returns on those assets. Running deficits means selling off assets and getting poorer - selling your cows to buy imported milk. The short-run payoff is consuming more and living beyond your means. That is all American politicians focus on. Trump wants the numbers to look good while in office so he can take credit, ignoring the long term.
Tariffs strip away that short-term benefit by raising the cost of living, consumer prices and interest rates - the two things on everyone's mind. Rising rates can push house values down, which Trump doesn't want, and could sink the stock market. Stocks haven't fallen yet because AI has propped up the market. Trump cannot win any trade war. Persistent deficits fund consumption while foreign recipients pile up productive assets. When tariffs reverse that bargain, they lift consumer prices and can push interest rates higher, threatening bonds, housing and stock valuations at once.
