Is this the main event driving Bitcoin and gold prices? The unknown reason revealed by an expert
Rising U.S. government debt, which is expected to reach 106% of gross domestic product (GDP) by 2028, is partially driving the recent rise in gold prices and Bitcoin (BTC), according to market observers. Despite relative calm in government bond markets about the nation’s fiscal direction, there is growing concern about the uncontrollable growth of U.S. government debt.
The U.S. budget deficit increased to $1.7 trillion in fiscal year 2023 and is projected to reach $2.6 trillion in 2034, according to the Congressional Budget Office. U.S. government debt is expected to increase from $17 trillion in early 2020 and $5 trillion in 2007 to $27 trillion in 2034.
According to analysts, this worsening trend has increased demand for Bitcoin and gold, which are widely used as hedges against inflation and the declining purchasing power of the U.S. currency. “Concerns about the U.S. debt cycle and currency depreciation, particularly fiat, are driving markets,” said Brad Bechtel, global head of FX at Jefferies.
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Rising debt has led investors to turn more to Bitcoin and gold. Bechtel added: “Concerns about the depreciation of fiat currencies are often one of the motivating factors for gold investors.”
Gold prices broke a record last week, reaching $2,431 per ounce, driven by expectations of central bank interest rate cuts and foreign central banks buying gold to diversify their reserves. This is partly due to inflation concerns and also as a way to prepare for possible US sanctions in geopolitical disputes.
Lawrence H. White, an economics professor at George Mason University, expressed concern that debt and deficits are increasing in a peacetime economy operating at full employment. “That’s usually the point where you should be running a budget surplus, and we’re not even close to that point. So in the next recession, our debt will increase even further,” White said.
*This article is not investment advice.
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