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$3200 Gold? National Debt as a Powerful Indicator

by Rachel MillsOctober 4, 2023

In an era of increasing uncertainty and economic volatility, it’s essential to consider alternative investments that can protect your wealth. Gold, often dubbed the “ultimate hedge,” has a remarkable track record of preserving value in times of fiscal turbulence. Buying some gold and silver as an investment, particularly when national debt levels are on the rise, could be the most strategic financial move you make this year.

Gold and Debt: A Simple Yet Powerful Concept

The relationship between government debt and the price of gold is remarkably straightforward: when debt rises, so does the price of gold. This seemingly simple concept holds profound implications for investors seeking a safe haven in a world of economic uncertainty.

Consider – following the dotcom crash, gold hit a low of $256 an ounce when our national debt stood at $6.5 trillion. Fast forward to today, and gold is trading at close to $2000 an ounce, nearly 8 times higher. Yet, what’s even more astonishing is that our national debt has soared to over 5 times its 2000 levels. This means that gold’s price has risen at a rate 1.6 times faster than the growth of our national debt.

The Future of Money

According to projections from the U.S. Debt Clock, our national debt is expected to reach a staggering $45 trillion by 2027, a 36% increase from today’s levels. If we assume that gold continues to outpace debt growth by 1.6 times, it suggests that gold could reach $3200 an ounce by 2027-representing a 60% increase from its current value.

These predictions might even be on the conservative side. Various extenuating circumstances could potentially push our national debt even higher. For instance:

  1. Economic Downturns: In the event of an economic crash, tax receipts could plummet, leading to a faster rate of debt growth.
  2. Geopolitical Factors: International tensions or conflicts (Taiwan???) may necessitate increased military spending, contributing to accelerated debt accumulation.
  3. Bailouts and Stimulus: History has shown that bailouts and stimulus packages can lead to substantial debt increases. After the 2008 financial crisis, for instance, debt doubled within just eight years. $5 Trillion was printed to cover lockdown stimulus checks. Bailouts and stimulus are becoming accepted precedent in Washington and there could very well be more to come.

Putting Debt Growth in Perspective

Consider this remarkable fact: in 1790, our national debt was a mere $71 million. It took 226 years to accumulate the first $10 trillion in debt. Then it took less than 10 years to double that. This serves as a stark reminder that once borrowing becomes normalized and people stop caring, government debt can accumulate at a breathtaking pace, particularly in times of economic turmoil.

In contrast, gold has consistently proven its worth as a hedge against rising debt and economic uncertainty. With the prospect of increasing national debt levels and potential extenuating circumstances on the horizon, investing in gold offers a prudent strategy to protect and preserve your wealth for the future. It’s a timeless asset that has stood the test of time and may continue to shine brightly as a beacon of financial security.

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