Factors such as the U.S. government’s approach to spending and currency production and the state of the cryptocurrency market can potentially make gold an increasingly enticing investment option, according to Kevin DeMeritt, chairman and founder of precious metals firm Lear Capital.

For the past decade, the level of national debt in the U.S. — which totaled $36.14 trillion on Dec. 31 — has increased each year, according to data from the Department of the Treasury and Bureau of the Fiscal Service. Costs relating to the interest on the debt have risen recently due to elements such as increased inflation.

In the past, government spending has grown during events like the 2008 recession, significantly adding to the debt level. When the COVID-19 pandemic occurred, for instance, during the 2019 to 2021 fiscal years, government spending increased by roughly 50%. 

The cost to maintain the national debt, as of November 2024, was $169 million — approximately 13% of all federal spending for fiscal year 2025, according to the government’s Fiscal Data resource.

Continued spending, DeMeritt says, could help enhance gold’s value by the end of 2025.

“There's probably a 90% chance we're going to keep continuing to have trillion-dollar deficits, that interest rates are going to come down — which is usually very good for the gold market — and that [gold] prices will end up at $3,200 to $3,500,” the Lear Capital founder says.

Currency Creation

The federal government has, at times, produced currency to address economic needs; during the COVID-19 pandemic, for example, the Federal Reserve poured trillions of newly created dollars into government securities to keep the markets from stalling and ensure credit was available, according to USA Today.

With the dollar no longer backed by gold, the Federal Reserve can essentially create as much currency as it would like to — which may be problematic because cash infusions can create bubbles in various asset classes, DeMeritt says. 

“It happened in 2000 with internet stocks; it happened in 2008 with real estate,” he says. “The bubbles happen, then the Fed raises interest rates, and you get a crash. The height of the cycle and the subsequent crash is going to be much bigger.”

Although creating more money can theoretically make the bills that are already in circulation worth less, gold has historically retained value over time due in part to its limited availability, DeMeritt says.

“We can only mine so much gold per year,” he says. “That controls the supply. It’s economics 101. Paper money is probably going to continue to fall, [as] it has for hundreds of years now, and the price of gold is probably going to continue to increase.”

Additional Investment Options 

Other items can have a similar appeal as gold — such as U.S. Treasury bonds, because they’re less likely than some assets, such as stocks, to spike and fall in response to economic conditions.

Treasury bonds that have fairly short maturation time frames, though, may not provide particularly large returns. Ones with longer maturation periods can lack the liquidity investors might want when a downturn occurs. 

When interest rates are low, according to CNN Business, gold can also be a more enticing option because Treasury bonds tend to offer lower yields in that environment.

Due to the sizable returns the cryptocurrency market has provided at times, it has also drawn investors’ attention in recent years. While the SEC has estimated the stock market provides an average annual return of approximately 10%, bitcoin’s price at the start of 2017 was about $1,000 — and it eventually rose to more than $19,000 by mid-December that year, according to Bankrate. 

As with the stock market, though, crypto can involve some risk. In the first quarter of 2018, for instance, bitcoin’s price fell by nearly 50%, and it ultimately declined 73% for the year.

That doesn’t mean investors need to completely avoid the crypto market; they may, though, want to consider including another asset in the mix that has performed consistently over time, DeMeritt says — such as gold, which has maintained value for decades.

“The one thing I caution people is it doesn’t have a track record like gold does,” he says. “Gold [has] a 5,000-year track record. The uncertainty in the market leaves a lot of investors nervous about how certain coins are going to be treated. We’re starting to see younger people [who] put a lot of faith in crypto want to diversify [by purchasing] real gold.”

What May Be In Store for Gold 

Information the Federal Reserve released in late 2024 indicates it will make two rate cuts in 2025, according to The New York Times, which could reduce interest rates further. The federal debt level is expected to continue to increase next year, potentially reaching $54.39 trillion by 2034, according to one estimate. 

Elements such as lower interest rates — and higher spending — could add to gold’s allure. In its “Digital Dollars, De-Dollarization and Debt: The Case for Gold as Your Best Defense” report published in mid-2024, Lear Capital said the rising level of government debt and corresponding fiscal policies could threaten economic stability in the U.S.

Physical gold assets, according to Lear Capital’s report, may be able to help meter some of the effects. 

“Economic cycles are hard to predict, but they're not hard to prepare for,” Kevin DeMeritt says. “Real estate, something I can't build any more of; gold — we don't pull that much out of the ground, really; those kinds of assets should at least keep up with other types of investment returns, if not outperform them. I can diversify in ways that will protect my portfolio and help me get through one of those cycles.”