A Dark Shadow Lights Up the Gold Market

There is a dark shadow hovering over the US dollar and the ability (or, rather, inability) of the US federal government to pay its way in the future. Below is a chart that shows the percentage of US government income that goes to pay interest on the national debt. It also shows the historical price of gold in real terms.

Before 2010, the chart uses historical data for both gold and the percentage of revenues going to pay interest. In the years ahead, the interest payments are an estimate based on known outstanding US debt and the anticipated rates. It’s just following the math.

As you can see, in the immediate future, interest on the debt will eat up more and more of the overall federal revenue stream. That’s because national debt and interest on that debt are growing far faster than taxable GDP. What does chart this mean to you, as an investor? It means that within the investment horizon of every Outstanding Investments subscriber age 12-92, we’re staring at the potential for utter economic devastation. If you’ll grant me a bit of artistic license in all this…life as we know it in the US could come to a crashing halt.

From the standpoint of investing, the chart also gives us every reason to anticipate even higher prices for gold, and, by association, silver. So if you don’t have some gold and silver, get some.Historically, the gold price rises when there’s an increasing percentage of federal revenues going to pay interest on the national debt. And historically, the gold price declines when US interest payments move down as a percentage of federal revenues.

So if you follow the correlations on the chart, the forecast for the price of gold is simply up, up and away. That is, by 2020, we may be living in a country where the government is chronically insolvent, due to interest payments, and gold is going stratospheric. We’ll enter into an era when the government won’t pay its day-to-day bills on time, if it pays them at all. Eventually, we may see the US currency in free fall, if not collapse. That’s why your ONLY real long-term hope in all of this is to invest in “real” assets – things that will retain value over time. Energy and minerals come to mind, certainly to include physical gold and silver.