 |
| Gold and dollar |
A veteran investor expects gold to reach $7,000 before the end of Trump's second term!
As gold continues to hit record highs, veteran investor Frank Holmes believes that what's driving the yellow metal upwards isn't just strong demand from central banks and hedge funds, but rather "out-of-control debt."
Holmes, CEO of US Global Investors, noted in a recent blog post that US government debt has reached a "staggering" $37.5 trillion, equivalent to about 124% of GDP. For comparison, when former US President Richard Nixon abolished the convertibility of the dollar to gold in 1971, US debt was just $400 billion, equivalent to less than 40% of GDP, according to Market Watch, which was reviewed by Al Arabiya Business.
Holmes said that over the course of five decades, the world has moved from "strict fiscal discipline to total financial chaos," noting that government debt around the world has "swelled" to $324 trillion, or more than 253% of global GDP, according to data from the Institute of International Finance.
The debt wave did not stop at governments. Holmes revealed that margin debt in the United States—the money investors borrow from brokers to purchase assets—rose nearly 33% in a year, reaching a record high of $1.06 trillion. Meanwhile, US household debt reached an unprecedented $18.39 trillion.
He added, "Investors are trading with unwise margin money to keep the party going... In my view, gold is a safe haven."
In Tuesday's trading, gold for December delivery hit a record high of $3,873.20 per ounce on the Comex exchange, up 47% year-to-date, marking its second-best performance ever through the end of September, according to Dow Jones Market Data.
But Holmes believes gold's journey is far from over, predicting it will reach $7,000 per ounce by the end of US President Donald Trump's second term, in January 2029. In 2020, he predicted gold would reach $4,000 within three years, citing economic stimulus policies and money printing.
He said: "The debt pile is incredibly large, and it's accelerating... Financial imbalances are widening, and monetary policy is constrained. The Fed can't raise interest rates aggressively without bankrupting the government, and it can't cut them deeply without damaging the dollar."
He continued, "Both options support higher gold prices, in my view."
Meanwhile, central banks continue to buy record amounts of gold, and North American gold-backed investment funds are experiencing their second-strongest year in terms of inflows, according to data from the World Gold Council.
"Central banks are racing to increase their gold reserves," Holmes said. "Governors realize that paper money can be printed endlessly, but real gold is limited."
He also noted that consumer demand in countries such as India and China remains strong, driven by the so-called "love trade," the association of gold with gifts and social status in both cultures.
He added, "I predicted gold would reach $4,000, and here we are... Now I see $7,000 on the horizon. That may seem like a bold prediction, but in a high-debt environment, it may be the wisest choice."
0 Comments