Dollar Devaluation, Soaring US Debt May Trigger Precious Metals Boom

Traditionally, precious metals such as silver and gold have seen their values soar during times of economic upheaval because of their ability to retain their value. While other investments may depreciate during an economic downturn, precious metals tend to retain their value, allowing investors to retain the value of their holdings even as other commodities lose value.

However, while you would expect that precious metals would have performed admirably in 2022 due to global economic stagnation, several other factors prevented this from happening. One key factor was the increased value of the U.S. dollar, which increased the opportunity cost of holding gold bullion and reduced investor interest in assets such as gold and silver. Fortunately, gold prices began trending upward toward the end of the year amid projections from experts that precious metals would experience a strong rally in 2023.

Several factors are expected to bolster gold prices over the course of the year. The primary reason is expected to be the increasing risk that the federal government could default on its loans and experience ongoing inflationary pressures. These factors may cause Wall Street to turn to precious metals in 2023 to preserve the value of their holdings.

Inflation data showed that consumer prices were still 6.5% higher than the annual average after it was revealed this week that the U.S. had hit its $31.4 trillion debt ceiling.

On the other hand, gold and silver went up by approximately 15% and 21% respectively over the last three months amid a faltering dollar and plummeting stocks that pulled major U.S. benchmarks further down. Genesis Gold Group CEO Jonathan Rose stated in a recent interview that a devaluing dollar coupled with federal government monetary policies were chiefly responsible for the rally in the precious metals market.

Since late last year, experts have predicted that looser monetary policy by the U.S. Federal Reserve would contribute to a gold rally through 2034. Rose noted that government spending presented a significant challenge to America’s economic health, especially now that the government was at risk of defaulting on its loans. If this happened, Rose continued, investors would lose their faith in the U.S. dollar and the greenback would weaken significantly.

While this certainly wouldn’t be beneficial for dollar-backed stocks, it would encourage more investors to store their funds in the physical precious metals market.

Based on an online survey by Kitco News, it seems that investors believe that silver prices will rally by more than 50% this year to reach $38 an ounce while gold could reach a historic $2,100 an ounce.

That anticipated boom will certainly boost the books of gold miners such as Newmont Corporation (NYSE: NEM) as they seek to deliver even better shareholder value.

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