North Korea, National Debt, And Interest Rates Could Cause Gold Prices to Soar
There are three risks that investors must pay attention to. They could send gold prices soaring in no time.
Before going into details, remember that gold provides safety in times of uncertainty, currency devaluation, and in wars.
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The three risks are North Korea, U.S. national debt, and interest rates.
Also Read: The Gold Price Forecast 2018 Might Surprise You
North Korea Threatening Global Peace
If you have followed the news lately, you may have heard a lot about how the rogue nation is threatening to use its intercontinental ballistic missiles (ICBM) against the U.S., threatening U.S. allies in the region.
For example, not too long ago, North Korea issued a statement through its official news agency. It said, “Japan is no longer needed to exist near us.” (Source: “North Korea threatens to sink Japan and turn US to ‘ashes and darkness’,” The Guardian, September 14, 2017.)
Regarding the U.S., it said, “Let’s reduce the US mainland into ashes and darkness. Let’s vent our spite with mobilisation of all retaliation means which have been prepared till now.”
Here’s the thing; if there’s even a little friction, this is going to be very damaging to the region, and it will only create uncertainty around the world. As a result, it wouldn’t be shocking to see investors rushing and sending gold prices higher.
U.S. National Debt Could Soar
As it stands, the U.S. national debt stands at $20.0 trillion. Sadly, it could skyrocket.
Why?
Not too long ago, President Trump met with the Senate Minority Leaders and pitched the idea of removing the limit the U.S. government could borrow.
Know that the debt ceiling is something that keeps the government somewhat in check. Removing it could result in the government spending without consequences. And we could see the national debt skyrocket very quickly.
What does soaring national debt mean? It could hurt the U.S. credit rating, which could impact the dollar to the downside. This could create demand for the yellow precious metal.
Interest Rates to Create Bond Market Collapse?
In case you haven’t heard yet, the Federal Reserve is raising interest rates in the U.S. It is also contemplating the idea of selling the bonds it holds.
Know that as interest rates go higher, bond prices decline.
Here’s a little background on the situation. Since the financial crisis, investors have flocked towards the bonds market. This was mainly because of low interest rates. The was Fed buying bonds as well.
It has to be questioned: What will happen if the Fed continues to raise rates and sells the bonds it has—worth around $4.5 trillion?
The simple answer: This could cause a massive sell-off in the bonds market.
Now, keep in mind, the bond market is huge. If there’s a sell-off, bond investors could be looking for places to park their money. Gold could provide them some safety, and this could cause gold prices to soar.
Gold Prices Outlook 2017, 2018 & Beyond
I can’t help but be bullish on gold prices. The yellow precious metal remains undervalued as it is.
If these factors come into play as well, we could really see a super spike in gold prices.
Dear reader, don’t forget; year-to-date, gold is one of the best-performing assets. It wouldn’t be shocking to see 2017 be another positive year for the precious metal.
Going into 2018, I expect investors waking up and saying, “We are missing out on the gains on gold.” This could result in much higher gains for gold prices than in 2016 and 2017.
