1. Our fiscal situation is out of control
Our fiscal situation is pretty unbearable at the moment. Sure, the S&P 500 is consistently hitting all-time highs. People are out spending money. I’m in Las Vegas right now, and I noticed the airlines were packed on my way over here.
But the lack of visual evidence of a recession is only a short-term thing.
Over the last 30 years, our debt problem has steadily gotten worse and worse.
It doesn’t matter which political party is in office, the debt has been rising. Plus, whoever wins the election is promising a ton more spending in 2025. So it doesn’t look like this fiscal problem is going away anytime soon.
2. Interest rates aren’t budging (despite rate cuts)
Last month, the Federal Reserve made its first rate cut in over 4 years.
The intent was to lower interest rates, but that hasn’t happened.
In fact, the latest data from Freddie Mac shows the average 30-year mortgage rate has actually increased 6.4% over the last 4 weeks since the move.
This is due to the long-term rates showing our fiscal house is not in order. Meaning the government has to raise more and more money and that creates an imbalance.
You might think “a higher interest rate should equal lower gold prices.” And that’s true in a conventional sense.
But these aren’t conventional times.
The truth is that if our country keeps issuing more debt and spends like crazy on the government side, interest rates can’t come down.
The only way out of the current mess is to devalue the US dollar and the debt, both good for gold.
3. The Middle East/Ukraine situation
The situation in the Middle East and Ukraine also isn’t helping. We’re roughly one year removed from when tensions started to heighten in the Middle East. Almost three years ago, Russia launched its first military operation in Ukraine.
The cost of war to Israel’s economy up is estimated to be around 12% of its GDP.
As for Russia/Ukraine, the U.S. doesn’t trade with them as much, but the Ukraine/Russia war has affected U.S. businesses and caused gas prices to increase, which has also contributed to inflation.
There’s also ever-lingering concern that Iran could escalate into a broader war in the Middle East.
This fear has already spilled bullish sentiment over to Gold’s little brother – silver. As of today, Silver is within $35 an ounce, which it last hit back in 2012.
YOUR ACTION PLAN
For these key 3 reasons, I believe gold still has plenty of room to run going forward.
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