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100% Certainty! Gold & Silver Prices Will ABSOLUTELY SHOCK Everyone When This Happens - Luke Gromen
According to Luke Gromen, founder and president of Forest for the Trees, the current price of gold has increased by 30% since November. Despite this substantial rise, the price of gold has yet to fully reflect a potential shift to being the primary reserve asset at the global central bank level. Gormen suggests that for gold to regain this status, its price would need to rise substantially.
In the early European trading hours on Monday, the gold price attracted some dip-buyers, recovering part of its retracement slide from the two-week high on Friday. Gold futures saw modest gains, primarily driven by a weakening dollar. The most active August gold contract settled at $2,345.90, up $11.20 or 0.48%. Meanwhile, the dollar index declined by 0.35% to 105.491, contributing significantly to gold's upward movement.
Gromen emphasizes that in a severe dollar crisis, gold would need to increase 19 times relative to foreign-held Treasuries to reach the 1980 levels. This scenario underscores the immense growth in US debt over the past 40 years and the country's heavy reliance on exporting Treasury bonds rather than other goods.
The Congressional Budget Office's most recent report highlights that the US is running a budget deficit of seven percent of GDP during cyclical strength and deficient unemployment. The public debt-to-GDP ratio is projected to reach an all-time high of 122 percent by 2034.
Gromen explains that one way to understand the potential for gold's price increase is to look at the market value of US official gold relative to foreign-held US Treasuries. Currently, this ratio stands at just 7%, indicating that gold would need to triple in price to return to the 1989 level and rise approximately sixfold to match the long-term average.
Adding to the optimism, a report published on Monday by an analyst at Bank of America forecasts that gold prices could hit $3,000 an ounce in the next 12 to 18 months.
US Treasuries are on the brink of breaking even after a roller-coaster first half of the year. Throughout 2024, Treasuries have been sent in opposite directions as policy-sensitive two-year yields soared above 5% in April. This spike was driven by fears over higher-for-longer US rates, prompting investors to dump bonds.
Adding to the turbulence, China unloaded a record volume of US bonds in the first quarter, escalating its pivot away from dollar-denominated assets. According to US Treasury data cited by Bloomberg, Beijing sold $53.3 billion worth of US Treasury and agency bonds from its stockpile.
Luke Gromen asserts that the US Treasury market is losing its status as the primary global reserve asset, with several factors contributing to this shift. Since 2014, global central banks have sold $400 billion in Treasuries while purchasing $600 billion worth of gold. This trend suggests a growing preference for gold over Treasuries.
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