Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Prices In 2020? Debt Drives Gold and Stocks

Commodities / Gold and Silver 2015 May 11, 2015 - 03:55 PM GMT

By: DeviantInvestor

Commodities

US National Debt:  We know the progression of debt – it increases, or it increases rapidly.  Since 1913 the official US national debt has increased about 9% per year – every year.  Has the economy increased 9% per year?  Of course not!  And that is why, in truly simple terms, prices rise.  The same is largely true in the UK, Europe, and Japan.  It is the same old story throughout the history of other fiat currency experiments.

Prices rise for consumer goods and for gold, stocks, and almost everything else (gasoline no longer costs 15 cents nor coffee 5 cents per cup).


But you might argue that the population increased and that was why debt increased.  Not so!  Examine the (linear scale) graph below.  It shows the US national debt divided by population and compares it to the SUM of gold and the S&P 500 Index for 40 years.

Nat Debt and Sum

This is the same data shown on a log scale graph.  Debt and prices increase together exponentially.

Nat Debt & Sum - Log

Why use the Sum of gold prices plus the S&P 500 Index?  Gold prices and the S&P move higher together in the long term because the dollar buys less each decade.  But in the short term they often move in opposite directions.  Gold represents real assets while the S&P represents paper assets so the Sum relates well to population adjusted national debt.  Examine the following log scale graph of monthly prices.

Sum Gold & S&P

SUMMARY:

  • Population adjusted national debt moved higher along with the Sum in a channel at approximately 6.7% per year for the last 30 years. The statistical correlation between national debt and the Sum for 30 years of annual prices is over 0.95.  We can be assured that national debt will increase, so expect the Sum to increase also.
  • National debt in the US and elsewhere is rising rapidly. As the debt increases the dollar, yen, pound, and euro devalue and purchase less gold and equities.  Hence stock prices and gold prices rise.
  • The S&P 500 Index reached an all-time high in April 2015 while gold has fallen back to 2010 levels and is approximately 40% below its all-time 2011 high. The next major moves are likely to be:
  • National debt moves higher – all but guaranteed.
  • The S&P 500 Index corrects lower. When?  Ask the High-Frequency-Traders!
  • Gold begins a new rally phase and surpasses $2,000 on its way much higher.

SPECULATION:

MORE OF THE SAME SCENARIO:

  • US population adjusted national debt increases at an average 6.7% rate until 2020.
  • The S&P oscillates above and below 2,000 as the economy weakens.
  • No nuclear war, no financial meltdown, the usual politics, more QE, and no “black swans” landing.
  • The “big reset” is miraculously delayed into the next decade.
  • The SUM reaches approximately 4,800 by 2020, with the S&P at about 2,000 and gold sells for about $2,500 – $3,000.

CHICKENS COME HOME TO ROOST SCENARIO:

  • US population adjusted national debt increases more rapidly at about 7.5% per year until 2020.
  • Business conditions deteriorate causing the S&P to fall from its current 7.5 year cycle high to about (guessing) 1,200 – 2,000.
  • The Middle-East, Ukraine, and other wars intensify, by 2020 the US dollar is no longer the undisputed global reserve currency, and the US dollar has weakened considerably.
  • By 2020 many financial and paper assets are recognized as dangerous and gold and silver have been revalued much higher.
  • Gold prices rise propelling the Sum to the high end of its 30 year range – about 6,500 to 8,000. By 2020 gold prices average $5,000 to $7,000.

HYPERINFLATIONARY SCENARIO for 2020:

  • Debt escalates out of control to unimaginable numbers. Governments find someone else to blame.
  • The S&P 500 Index goes parabolic.
  • Financial TV commentators are practically breathless as they discuss the huge increases in the S&P and ignore the rampant inflation, unemployed workers, and social distress.
  • Social and economic conditions are deadly and exceedingly difficult.
  • Income equality in the western world worsens and riots become more common.
  • Gold prices go parabolic and reach currently unthinkable numbers.

CONCLUSIONS REGARDING ALL SCENARIOS:

  • History and current actions justify the expectation that governments and central banks will increase debt, devalue fiat currencies, and thereby force gold and silver prices much higher.
  • Convert digital dollars, yen, pounds, and euros into gold and silver while you can. Current “on sale” prices will not last much longer.
  • Look for similar analysis regarding silver prices in 2020 in an upcoming article.
GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2015 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Deviant Investor Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in