The rally in stocks and the dollar seen over the last six weeks since the U.S. Presidential election has been the center of financial media focus. Given the amount of ground these markets have covered in a relatively short period of time, you might be asking yourself just how much more room stocks and the greenback have to run to the upside.
Although no one can say for sure, the answer is probably a lot.
The rally may very well continue into the first several weeks of Trump’s Presidency, and could even extend well into the first quarter.
There’s just one little problem-U.S. debt and rising yields.
In a recent article on Kitco.com, head of precious metals strategy for ICBC Standard Bank Tom Kendall raised some significant concerns.
According to the article, Kendall released a report on Friday that cited some $14 trillion in the form of treasury bills, notes and bonds that has been issued by the U.S. Treasury. He went on to cite the Congressional Budget Office (CBO) who has estimated that the interest payments on this debt will amount to $250 billion this year.
That report, however, was released back in August. Bond yields have soared since that time. The article quoted Kendall as saying: “However, since that August report was released yields on 5 to 7 year Treasuries have increased by around 80 basis points, most of which has come since the US election.”
Now here’s where it gets scary…
The article quoted Kendall as going on to state: “If we apply an 80bps increase to the CBO’s net interest forecasts and keep the other variables unchanged, then by 2026 the Treasury would be paying an additional $185 billion in interest annually.”
That’s $185 billion in extra interest costs potentially paid annually.
According to the article, Kendall went on to suggest that eventually discussions over lifting the debt ceiling beyond $20 trillion would ensue.Rising interest costs coupled with what could potentially be disappointing economic growth could potentially fuel a renewed interest in gold in 2017.
The debt issue is something that cannot and will not simply go away. Policy makers could potentially find themselves having to decide how to handle rising interest rates and higher costs, and could potentially look to currency devaluation or other measures to make the debt more manageable.
In our view, almost any such scenario could be highly bullish for gold.
If you don’t already have an allocation in gold and physical precious metals, now may be the ideal time to start one. If you currently own physical gold or precious metals, now may be the ideal time to add to your holdings.
Speak with an Advantage Gold account executive today about the potential benefits of physical gold and silver ownership. Our precious metals professionals are here to answer your questions, and can guide you on the path to precious metals ownership. We can even show you how to acquire and hold physical gold and silver using your IRA account.
Gold and silver have been considered a reliable store of value and protector of wealth for centuries. They can potentially offer a meaningful hedge against currency depreciation, inflation, deflation and other economic and geopolitical issues.
The debt problem is not going away. Take steps now to potentially help secure your financial future and hedge against falling currency values and a loss of purchasing power. Call us today at 1-800-341-8584 to get started.Tags: advantage gold, CBO, debt ceiling, gold, government debt, interest costs, rising yields, trump rally