Gold and BTC Climb Amid U.S. $345B August Deficit and Record Net Interest Spending

U.S. August Deficit Hits $345B as Gold Nears $3,670 and Bitcoin Tops $115K

The U.S. government posted a $345 billion deficit in August, with $344 billion in receipts offset by $689 billion in spending. The largest expenditures were Medicare ($141B) and Social Security ($134B), while net interest payments rose to $93 billion, now the third-largest federal expense, highlighting the mounting impact of rising borrowing costs on U.S. finances.

The Federal Reserve is expected to cut interest rates by 25 basis points this month. However, history shows that rate cuts may not be straightforward: in September 2024, a 100-basis-point easing coincided with a sharp jump in long-term yields—the 30-year Treasury surged from 3.9% to 5%, and currently sits around 4.7%. With inflation accelerating, additional cuts could push yields higher, raise debt servicing costs, and exacerbate fiscal pressures.

Markets have reacted decisively. Gold surged to nearly $3,670 per ounce, posting almost a 40% year-to-date gain, while Bitcoin climbed above $115,000, reflecting investors’ search for alternatives amid concerns over debt sustainability and long-term fiscal pressures.