The US economy stands on the brink of a significant debt spiral, according to one market strategist. This will push gold significantly higher over the next few quarters. In this regard, the strategist is talking about a record increase for gold prices.
The Fed is on the verge of making major policy mistakes!
Jess Felder, creator of the Felder Report, says the Federal Reserve is desperate to ensure financial markets continue to have confidence in their ability to manage uncertain economic conditions. But in this desperation, he says, he is pursuing higher interest rates in a world full of government debt. Therefore, he argues, the Fed is on the verge of making significant policy mistakes. In this context, Felder makes the following statement:
The Federal Reserve continues to say that interest rates should be higher for longer. However, as a result, we are starting to see problems in the Treasury market. We will see more signs of financial instability with more volatility in Treasuries.
That’s when gold prices will explode!
The U.S. government paid $879.3 billion in interest in the fiscal year that ended September 30. cryptokoin.com As you follow from , increasing debt and high interest rates were effective in this. Expectations are that service costs will rise to $1 trillion in the new fiscal year. Meanwhile, U.S. debt costs have exceeded the country’s annual defense budget. Rising US debt concerns have already begun to impact US Treasury markets. Last week, the US government sold $24 billion of 30-year bonds in a disappointing auction. Analysts say that during the bidding, primary dealers who purchased the offering not taken up by investors were forced to accept 24.7% of the debt on offer. It also notes that this is more than double last year’s average of 12%.
Jess Felder notes that in this environment there is a very real risk that the bond market will not adhere to economic conditions. This will likely push stock markets back into bear market territory, Felder says. He also states that it could push the economy into recession, forcing the Fed to step in and limit bond yields. Based on this, the strategist makes the following inference:
As volatility in the Treasury market increases, the Fed will have to step in. They will say that they will not stop reducing the balance sheet. However, they will launch a new program to stabilize the markets. Markets will understand this and see it as a new round of QE. That’s when gold prices will explode.
Investors will eventually turn to gold
Felder adds that conditions will be ripe for gold prices when the unemployment rate in the United States begins to rise and recession fears begin to rise, bond yields rise rather than fall. The strategist says it is inevitable that yields will continue to rise. Because he states that the US government is not in a position to provide any financial support when the economy eventually goes into recession. Continuing from this point, Felder makes the following evaluation:
The size of the US debt and the increasing budget deficit will make this recession different from others. Anything the government does will only widen the liquidity gap in Treasury markets. This is how the debt spiral begins. Over the next few quarters, investors will realize that this financial problem is not going away. So, eventually they will turn to gold.
Target for gold prices: $2,700
How high could gold prices rise in a new rally spurred by the debt spiral? In this regard, Felder says that he expects a rise up to $ 2,700. The strategist explains his prediction as follows:
The three-year sideways correction in the gold price is a very classic bullish flag pattern. Looking at the flagpole before that, the rally in ’18, ’19, a simple projection from classic technical analysis highlights a target of around $700 above the current price.
