What’s Next After $5,000 Gold?
What’s Next After $5,000 Gold?
Notes From the Field By James Hickman (Simon Black) January 27, 2026
In the year 578 AD, a Korean immigrant named Shigemitsu Kongo arrived in Japan at the invitation of the royal family. Buddhism was flourishing, and the Japanese needed someone who knew how to build temples. Kongo was their man.
He founded a construction company—Kongō Gumi—that would go on to build some of Japan's most iconic Buddhist temples. And, somewhat miraculously, the company stayed within the same family for over fourteen centuries.
That's roughly 40 generations. The company lived through the rise and fall of the samurai, the Meiji Restoration, two World Wars, and the atomic bomb.
But in 2006, after 1,428 years of continuous operation, Kongō Gumi went bankrupt.
Japan experienced a legendary financial bubble in the 1980s; asset prices exploded. And, like many Japanese companies during that decade, Kongo Gumi borrowed heavily to invest in real estate.
But eventually the bubble burst. Asset prices crashed. And all that remained was the debt... which Kongō Gumi could not repay.
The world's oldest company— which had survived 1400+ years of war, natural disaster, and literally even two nuclear strikes, was undone by too much debt.
It's a powerful reminder: it doesn't matter how long you've been around. What matters is your current financial reality. History doesn't protect you from math.
And this same principle applies to sovereign nations.
Japan has the worst debt-to-GDP ratio on the planet—256%— more than double the United States.
But, like the US, the Japanese government has gotten away with this insane debt level for a long time.
Part of the reason was that their central bank (the BOJ) held interest rates at near zero so that the government could borrow at almost no cost.
If interest rates are 0%, in theory you could borrow unlimited quantities of money without any consequences... but ONLY as long as interest rates remain at zero.
Unfortunately for Japan, the bond market looks like it has finally had enough.
On January 19th, Japan's new Prime Minister Sanae Takaichi announced a 21.3 trillion yen (about $140 billion) stimulus package. The bond market's response was immediate... and visceral.
Within days, Japan's 40-year government bond yield soared to 4.24%—a record high, and the first time a Japanese sovereign maturity has breached 4% in over three decades.
The 30-year yield surged to nearly 4%. Even Japan’s 10-year government bond hit 2.38%, the highest since 1999.
Higher rates are a five-alarm fire for any heavily-indebted country. And we've seen this movie before.
In October 2022, British Prime Minister Liz Truss announced a tax-cut plan that would have resulted in a higher budget deficit. The bond market wasn’t having any of that. Government bond yields skyrocketed, and the British pound plummeted.
It was so bad that the Bank of England had to launch emergency interventions, and the Prime Minister resigned after just 49 days in office— the shortest tenure in British history.
You can probably see the pattern. Bond markets first revolted in Britain, the world’s sixth largest economy. Now it’s revolting in Japan, the world’s fourth largest economy.
How long until bond markets start to revolt against the world’s largest economy?
Billionaire investor Ken Griffin connected these dots explicitly when he said last week, "What happened in Japan is a very important message to the [US] House and to the Senate. . . You need to get our fiscal house in order."
We've been saying this for years: politicians in Congress think that, because America is the largest economy with the world’s reserve currency, the rules don’t apply to them... and that they can run endless, outrageously high deficits without any consequence.
This is completely delusional.
If the US doesn’t get its fiscal house in order, the dollar won’t be the world’s reserve currency for much longer. In many respects this shift is already happening.
Just look at China: right before the 2008 Global Financial Crisis, China held less than $500 billion of US government bonds— roughly 5% of the total US national debt at the time.
By 2011, just three years later, they had increased their holdings to $1.3 trillion—nearly 10% of total US government debt.
But China has been selling off its Treasury holdings rapidly over the past two years. They've cut their position by roughly 50%, down to about $682 billion, or less than 2% of the national debt.
To be clear, I'm not rooting for China to own a larger share of the US national debt. I'm rooting for a lower national debt.
But that ultimately requires Congress to be sensible and realistic.
And it’s not like cutting the deficit is some impossible task.
A 23-year old YouTuber was able to singlehandedly uncover billions of dollars of fraud in just one city. All Congress has to do is stop it.
But they are unwilling to do so.
With such unserious, low IQ politicians in Congress, foreign governments and central banks are thinking twice about investing in US Treasury bonds. Many (like China) are selling and starting to diversify in other asset classes... including gold.
In fact, rising demand from governments and central banks around the world has been one of the key drivers in gold’s rising price.
But it's not just central banks anymore. Pension funds and insurance companies have been increasing their gold allocations as a long-term asset.
And this makes sense. Pension funds and insurance companies traditionally invest in very long–term bonds (like the 30-year) because they have to match their assets to long-term policy liabilities (like life insurance).
Clearly these companies are worried that after adjusting for taxes and inflation, owning US government bonds for THREE DECADES is simply too risky. So they’re turning to gold instead.
I don’t know where gold prices are going today, tomorrow, or next month. But the long-term trend is pretty clear: as long as Congress continues to be unserious about fixing the deficit, gold will keep going higher.
And that means companies in the real asset (especially gold) business are primed to do extremely well.
To your freedom, James Hickman Co-Founder, Schiff Sovereign LLC