Stephen Pope, a macroeconomic strategist and managing partner of Spotlight Group, believes that if more borrowing is the government's solution, then he expects gold to suddenly become an ideal asset.
Pope believes that gold is highly correlated with debt, especially the debt level of the United States has exceeded 2 1 trillion dollars.
Pope explained in an article published by FX on Tuesday:
"The U.S. government is under pressure to cut its fiscal deficit, and the United States has embarked on a trade war with China and Europe. At the same time, the Ministry of Finance announced that it plans to borrow nearly 1 trillion US dollars this fiscal year. "
He added that it is clear that the US Treasury cannot continue to raise the debt ceiling to meet the federal government's borrowing needs.
At the meeting in March, the Fed raised the target range of the federal funds rate by 25 basis points to 1.50%- 1.75% as scheduled, and Fed officials still expect to raise interest rates three times this year.
Pope said that further raising US interest rates will bring great pressure on risky assets and make hedging options more attractive.
He said:
"Of course, the record low interest rates in the past few years have pushed up the prices of major assets such as stocks, bonds and real estate. The rise in interest rates not only applies to government debt, but also has a major impact on enterprises and individuals. "
Pope believes that this may lead to an increase in the number of corporate bankruptcies in 20 18 years.
Pope said: "A sudden rise in unemployment may lead to a decline in house prices, and at this time, the US government will see more dollars flowing out of the system because they will pay more interest on their debts."
After the Trump administration's tariff list appeared, the price of gold soared on Wednesday (April 4), but then fell sharply due to the easing of concerns about trade wars.
On Wednesday, Coudrat, Trump's chief economic adviser, said that the US government wanted to "negotiate" with China, not a trade war, which eased the once-intensified trade dispute.
Coudrat said: "The tariff measures are only suggestions and have not been implemented. We are asking for advice. There are at least two months before taking action. "
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