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Will Gold Rise Amid Massive Currency Debasement?

By August 21, 2020 No Comments

While the market appears to be improving from the outside, those in the know are forecasting what’s next when the currency debasement materializes and are looking to gold for answers.

There’s been talk of the dollar weakening and overall currency debasement but what can the dollar actually weaken against? The Euro? The Yuan? Alternative Currency?  Does gold stand a chance?

These recent trillions of dollars in debt were monetized to stimulate the economy.  But how much longer can it continue at this pace without destroying the purchasing power of the dollar?

Analysts believe that we will be dealing with Covid-19 for a period of time which means that consumers, businesses, and now states will need trillion more dollars. The expectations for further stimulus due to the Coronavirus will further debase the dollar currency and could very well extend gold’s record-setting rally as gold may even be the obvious alternative currency.

The precious metal surged to a record-breaking benchmark, well above $2,000/oz earlier this month as central banks including the Federal Reserve unleashed vast stimulus to support economies hurt by the coronavirus pandemic. That’s spurred bets that paper currencies will lose their value as money supply jumps. Per Bloomberg, Goldman Sachs has called gold the currency of last resort and has forecast more gains. This comes on the heels of Warren Buffet’s Berkshire Hathaway exiting bank with over a quarter of their investment funds and moving it into gold.

Many experts still believe gold will climb back above $2000 as it is undergoing another rollercoaster week, with expectations for the metal exceeds the $2,200 benchmark before the end of the year.

Spot gold hit an all-time high of $2,075.47 an ounce on Aug. 7 as the dollar weakened and real interest rates fell well below zero. On Thursday it climbed 0.4% to $1,936, up almost 28% this year. Prices eased midweek after minutes from the Fed showed it edging away from a step that would underscore a commitment to an extended period of the ultra-loose policy.

The US National debt has now soared to 130% of GDP from $22 trillion at the beginning of the year to $26.6 trillion which equates to around 1,000% of Federal revenue. Our government will add $4 trillion to that dung pile this year alone, which is an incredible 20% of GDP. All the stimulus and bailout of corporations, individuals, and businesses and now States, has completely destroyed the balance sheet of the US Treasury. If not for the Fed’s promise to purchase an unlimited amount of sovereign bonds, the bond market would have already collapsed.

While the latest round of stimulus talks have yet to yield a deal, the Fed has already exasperated its balance sheet by about 3 trillion this year, with Goldman cautioning that U.S. policy is triggering debasement fears.

Analysts predict the Fed will ramp up asset purchases and that the gold bull market will prevail.

Fearing results of inflation, investors are eager to hedge their portfolios with precious metals and are really considering what the long term effect of this unstable market will look like. They’re well aware there will be continued asset inflation before real inflation even shows up so are they are gearing up to balance diversify their retirement and savings with safe-haven investments.

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