How Debt and Gold Are Dancing Together: A Look at the Future

Since the year 2000, the U.S. government has been racking up debt like it’s going out of style. In fact, the national debt has ballooned by 527%, jumping from $5.7 trillion to a whopping $35.75 trillion today. But as the debt has soared, so has the price of gold, which has skyrocketed by 864%, leaping from $280 to around $2,700 per ounce. Gold tends to shine brightest when people worry about rising debt and economic uncertainty, making it a popular safety net in shaky financial times.

How Fast Are They Growing?

Let’s break it down a little more. Debt has grown at about 7.8% per year since 2000, and gold has gone up by about 9.5% each year. This shows that gold is like the sprinter of the two, outpacing debt over time. It’s a solid performer when the government’s borrowing spree feels out of control.

How Gold Reacts to Debt

Here’s the cool part: over the long term, on an annual basis gold has increased by 21% more (1.21 times) the percentage increase in U.S. national debt. So when the government borrows more money, investors start buying gold to protect themselves, pushing the price up even more. It’s like gold is saying, “Don’t worry, I’ve got your back.”

What’s Happening Now and What’s Coming

Right now, the U.S. is adding $1 trillion to the national debt every 100 days. This means that the next 100 days, the debt grows by 2.8%, which, based on the historical gold-to-debt ratio of 1.21, means gold prices could increase by about 3.4% for every 2.8% increase in debt.

Projections

6 Months: In the next six months (or about 1.8 cycles of 100 days), the debt should increase by 5.6%. Using the 1.21x ratio, gold should rise by 6.2%. Starting from the current (rounded) gold price of $2,700, this would bring gold to approximately $2,865.

1 Year: Over one year (about 3.7 cycles), the debt should rise by 11%, pushing gold prices up by about 13%. That would place gold at approximately $3,055 in one year.

5 Years: If the U.S. keeps adding debt at the current rate, it could see about $18.25 trillion more debt over five years. This would result in a 67% increase in debt, and applying the same gold-to-debt ratio, gold could rise by approximately 81%, leading to a price of $4,885 in five years.

Conclusion

Debt and gold are locked in a dance, and right now, it looks like gold is leading. As the U.S. piles on more debt, gold will likely keep rising, protecting investors from the risks of a growing national debt. If things keep going the way they are, we could see gold hit new highs in the next year, and it could go much higher in the next five.

And here’s one more interesting fact to leave you with: in bull markets, silver tends to move 2-3 times as much as gold. So, while we’ve projected where gold might be in the next 6 months to 5 years, we’ll leave it to your imagination to consider just how high silver could soar.

Neptune Global

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