Gold (XAU): Luke Gromen Says US Interest Costs Hit 106% of Revenue

US Interest Costs Reach 106% of Revenue

Luke Gromen, founder of the research firm The Forest For The Trees, warned in a BNN Bloomberg interview on November 15 that gold's recent weakness reflects a fiscal problem in Washington rather than a change in the metal's medium-term direction. His starting figure is the US government's interest-type burden: entitlement payments, debt interest and veterans' spending combined consumed 106% of federal revenue in the 2026 fiscal year that ended in September. That level, he told the network, should make investors nervous, because it leaves the Treasury close to a binary choice between creating dollars to keep the payments flowing and allowing them to lapse. Gromen traced a repeating market sequence across the roughly three to four years since the ratio first crossed 100%: gold sells off, long-term Treasury yields rise and equities drop, and the pattern persists until either the Treasury market malfunctions or new dollar liquidity is supplied. He noted that the ratio had never exceeded 100% at any point in roughly 250 years of American history before the pandemic. His medium-term read follows from the arithmetic: the higher real rates climb, the faster the debt burden becomes unmanageable, and short of an outright nominal default the only remaining route is dollar liquidity expansion, a combination he described as the most positive setup possible for gold. In his framing, the question facing holders is not whether that response arrives but how long they can wait for it.

A $600 Billion Monthly Playbook and $8,000-$10,000 Gold

The precedent Gromen cited is the pandemic response. The Federal Reserve bought $600 billion of Treasuries and mortgage-backed securities every month and cut rates to zero, tolerated inflation running at 8% to 10% for 12 to 14 months, and in that window pushed real interest costs down from 115% of revenue to 85%. The same prescription, in some form, will be needed again, he argued, which leaves gold weaker in the short run but structurally favored into the middle of the cycle. His base case puts the metal at $8,000 to $10,000 per ounce, while he dismissed $18,000 as a low-probability tail scenario. The calculation starts from the 261 million ounces of official US gold holdings: valued at market prices, that stock has historically backed 40% to 60% of foreign-held US Treasuries, stood at 20% before the Berlin Wall fell in 1989 and reached 135% in the 1980 crisis, against roughly 11% today. Returning to the 1989 level would require the price to nearly double, the long-term average would need a fourfold to sixfold move, and a repeat of the 1979-1980 dollar crisis would take an elevenfold gain. Gromen added a currency dimension: parts of Washington welcome a rising gold price because it weakens the dollar against the yuan, and with the metal at roughly 25,000 yuan per ounce, he calculated that a yuan move from 6.7 to 5 would require $5,000 gold and a move to 4 would require $10,000. He called gold the axis of the currency-system realignment now underway, with stocks rising in dollar terms but falling against gold ounces.

Resistance at $3,878 Caps the Rebound

COINOTAG data shows Gold (XAU) trading at $3,866.51, up 0.77% over 24 hours inside a $3,777.01 to $3,867.04 range, still in a daily downtrend with an RSI of 37.4 and a bearish MACD signal. The composite scoring puts the strongest resistance at $3,878.58, scored 79 out of 100, and the strongest support at $3,778.54, scored 78 out of 100. A close above $3,878.58 would soften the downtrend reading, while losing $3,778.54 would open the path toward the next moderate support near $3,522.75. Within Gromen's framework, the current weakness is the phase that precedes the liquidity expansion he expects, so the daily trend stays down while his medium-term case remains intact.