Lyn Alden on why the Fed is fighting a losing battle against inflation

While gold recently pulled back from its record highs, Alden remains structurally bullish on the metal as a long-term hedge. She views the current market correction as a necessary consolidation after a rapid, outsized rally, noting that while gold is no longer a screaming bargain, its role as a self-custodial asset remains essential in an era of currency debasement. For now, she suggests investors should expect choppy conditions until the market resets.

The core of the problem, according to Alden, lies in the fundamental mismatch between the Fed's policy and the nation's fiscal reality. Unlike the Volcker era, where higher rates could effectively curb inflation without destabilizing the government's balance sheet, today’s high debt-to-GDP ratio means that rate hikes disproportionately increase interest expenses. This forces the central bank into a precarious position, effectively trying to bail out a sinking ship with a leaking bucket.

Ultimately, Alden anticipates that fiscal policy will continue to override monetary tightening. With neither political party showing an appetite to reform major entitlement programs like Social Security or Medicare, she projects roughly $10 trillion in deficits over the next five years. Should the Treasury market face a liquidity lock-up, she expects the Fed to intervene, likely through its standing repo facility or direct asset purchases, further cementing the long-term trend of debasement.