As the Fed continues to steer inflation back toward its 2% target and the 10-year US Treasury yield falls below 5%, Jeff Sarti, CEO of Morton Wealth, stresses that gold remains the most critical safe-haven "insurance" tool in investment portfolios. He states plainly that if forced to pick between gold and the 10-year US Treasury, "I would choose gold without hesitation."

In an interview, Sarti says that in an environment of peRSIstent inflation and rising economic uncertainty, a 5% return over the next decade lacks appeal. He argues that investors often make the mistake of directly comparing non-yielding gold with the yields on US government debt, but the two assets serve completely different roles within a portfolio.

Gold as "Insurance", Treasuries as an Income Tool

Sarti describes gold essentially as an "insurance policy", while the 10-year Treasury is merely an income-generating instrument. "Gold is insurance. The 10-year Treasury is not insurance; it is an income asset." He says locking in a 5% return for 10 years offers insufficient protection if inflation stays elevated for a long time, currency volatility spikes, or market confidence in US fiscal policy deteriorates.

He adds that genuine insurance ought to deliver excess returns when conditions worsen. "Insurance should give you excess returns when things go bad."

Fed Rate Hikes Cannot Fix Fiscal Problems

These remarks came after the Fed raised interest rates by 25 bASIs points. The hike pushed the federal funds rate range to 3.75% to 4.00%. Despite the Fed’s hawkish stance, US inflation remains noticeably above target: August Consumer Price Index (CPI) rose 0.4% month-on-month and 3.4% year-on-year; core inflation, excluding food and energy, climbed 2.4% year-on-year.

Sarti believes the Fed is heading in the right direction and further monetary tightening is necessary. Yet he questions whether another 25-bASIs-point hike, or even several small rate increases, can materially alter the inflation outlook. "I think 25 bASIs points here and there are just noise," he says. "The bigger signal comes from fiscal policy."

He points out that the US economy and financial system carry far larger debt loads than in previous inflation cycles, which means the current Fed chair cannot implement the kind of aggressive rate hikes that former Fed Chair Paul Volcker deployed in the early 1980s. "Someone like Volcker could not do what he did back then today, mainly because of our debt-to-GDP ratio."

Still, Sarti emphASIzes that the Fed cannot ignore inflation. In his view, policymakers must lean toward tighter monetary policy even if higher interest rates raise financing costs for the economy and the federal government.

Long-End Yields and Refinancing Pressure Draw Attention

He states that this tension between policy and fiscal positions has become increASIngly visible in the bond market. As large volumes of federal debt come up for refinancing, higher borrowing costs will directly boost government interest expenses and further worsen the fiscal outlook.

Sarti also cautions against interpreting the recent rise in long-term yields simply as a loss of anchoring in the US Treasury market. He argues part of the uptick represents a normalization repair after the deeply inverted yield curve between 2022 and 2024. Even so, he stresses the long end of the Treasury curve remains one of the most important indicators for investors to monitor.

"Will there be enough market demand to absorb the massive supply that is about to flood in?" he asks. Sarti believes this question matters more for gold than whether the Fed delivers another 25-bASIs-point rate hike before year-end.

"It is a fiscal problem. That is the fiscal environment we are in," he says.

In his opinion, years of ultra-low interest rates allowed the government to ramp up spending sharply without immediately facing the consequences of higher borrowing costs. The only truly disciplined and prudent way to correct this imbalance would be to slow spending, yet he admits, "That will not happen."

Gold’s Long-Term Logic Shifts Toward Fiscal Credit

Sarti expects the US will run trillion-dollar fiscal deficits for quite some time into the future, forcing the Fed into increASIngly difficult policy choices. In this environment, the bond market may ultimately impose the fiscal discipline that policymakers are unwilling to enforce voluntarily.

"Fiscal policy is somewhat locked in, and monetary policy is backed into a corner," he says. "They are faced with bad options, and the bond market will ultimately make the decision."

This shift carries major implications for gold investors. Sarti says gold reflects not only Fed monetary policy, but also broader doubts about US fiscal sustainability and market confidence in the US dollar. "If the bond market starts losing its anchor… that is when you want to hold gold."

He describes gold as a "truth-teller", arguing gold prices cut through short-term market noise and reflect whether investors still regard the US dollar and government debt as reliable safe-haven assets. "I think gold is telling you there are many cooks in this kitchen, and the biggest one is fiscal policy."

Therefore, Sarti thinks another Fed rate hike before year-end may reassure markets slightly and show the central bank remains committed to taming inflation, yet it cannot resolve deeper structural issues. Gold’s long-term investment thesis depends more on whether Washington can rebuild credibility for its fiscal trajectory than on whether the Fed raises rates by another 25 bASIs points.

Against the backdrop of runaway US sovereign debt, Sarti offers a straightforward recommendation: if American voters really receive a $5000 check from the Trump administration after midterm elections, buy gold right away. "Immediately, convert it into gold," he says.