U.S. government debt and gold price

U.S. government debt and gold price

Even if the U.S. national debt ceiling is raised, gold and silver will still have good growth prospects. The rise in U.S. public debt will put pressure on the Federal Reserve System (FRS) to monetize debt.

But recently, gold and silver have been pressured by the news that a potential political compromise has been found on the country’s public debt. Many traders have been able to make a profit with the recent strong changes in gold and silver prices. Comparing the current bullish gold market with that of the 1970s, gold has more upside potential than one could imagine.

From 1971 to 1980, the price of gold rose 24 times from $ 35 to its peak of $ 850 an ounce. If we transfer past experience to the current situation, then a 24-fold increase in the price of gold since the 2001 low of $ 275 per ounce should lead, in the current bullish market, to a final price of $ 6,600 per ounce. Thus, gold is still far from being considered expensive. Investors should take into account the fact that adjusted for inflation, the price of $ 850 in 1980 now corresponds to the level of $ 2,400 per ounce. Perhaps the price of gold rose disproportionately in the 1970s due to high inflation and geopolitical instability. The economic situation today is much worse than it was then. If earlier industrialized countries like the United States, Japan, and Western Europe were creditors in the 1970s, today they are debtors. In addition, compared to the 1970s, today China and other Asian countries are the major players in the gold and silver markets.

If the agreement is adopted to increase the U.S. national debt, then gold and silver may remain under pressure in the short term, but in the long run, the macroeconomic situation will still contribute to rising prices for gold and other precious metals.

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