Gold Nears $4,700 Boosted by Debt and Inflation Concerns

Gold has soared 17% since the start of August, and the late summer rally is picking up steam. The precious metal hit a three-month high this week as the U.S. Treasury’s bond-market buyback program spooked global investors, with the U.S. national debt topping $40 trillion for the first time in history.

Investors are flocking to the safety of gold as concerns grow that the government is debasing the U.S. dollar as it buys back its own long-dated government bonds. This has reignited concerns that U.S. Treasuries, long the “safe-haven” asset for the world, are losing their luster.

Elected U.S. policymakers have shown little appetite to curb the ever-rising national debt, and this year alone the Congressional Budget Office expects the deficit to hit $2.1 trillion. Washington politicians to date have been unwilling to tackle the budget deficit, which would require a combination of spending cuts and higher taxes. The market is starting to send Washington, D.C. a wake-up call.

Yet, the Treasury Department ignored the reason global investors are getting jittery about U.S. Treasuries: a lack of fiscal discipline in Washington, D.C. Instead, the Treasury Department essentially refinanced its debt last week through a buyback of longer-dated securities, with plans to issue more shorter-dated Treasuries like T-bills.

Investors took action quickly and bought gold. The precious metal has climbed from around $4,000 an ounce at the start of the month to nearly $4,700 this week.

Meanwhile, the Iran war, now heading into its sixth month, has kept energy prices high, which is boosting prices on gas and everyday goods for Americans. U.S. inflation has sat above the Federal Reserve’s 2% target for five years now. So far, the new Fed Chairman Kevin Warsh hasn’t taken action to lower inflation. Gold is benefiting from worries about the Fed’s credibility and its willingness to take action to fight inflation.

Here’s what Wall Street experts are saying and doing this week:

A portfolio manager at Fidelity doubled his fund’s holdings of gold over the past three weeks. The manager, George Efstathopoulos, funded his gold purchases with the sale of high-yield bonds and said the same underlying factors that drove gold to a record high in January remain in place.

Billionaire Ray Dalio said investors should slash their bond holdings and invest as much as 15% of their total assets in gold to hedge against the risk of a U.S. debt crisis.

Gold’s safe-haven status is also being supported by growing global trade tensions as the U.S. has threatened to take economic action against any country that does business with Iran. A spiraling trade war with Canada is unfolding this week as well, as U.S.-Canada trade talks broke down.

Everywhere you look, there’s a new crisis, a new economic worry and investors are taking action with their portfolios. Investors are selling technology stocks and U.S. bonds and are piling into the safety of gold, a proven asset to protect and grow your wealth.

While the future may be uncertain, there is peace of mind and safety in gold ownership. The precious metal is climbing in a strong uptrend.

In June, J.P. Morgan Global Research predicted that gold would climb to $6,000 before year-end and touch $6,300 by the end of 2027.

Gold is on the move. Do you own enough?