2020 has been a year of lost confidence – in health, in safety, in healthcare, in civil authority and in the economy. With unrest in the heart of our home state of Minnesota and struggling businesses and households across the whole of the U.S., Americans are suffering. What’s even more unfortunate is many of these struggles are not unique to our nation right now.

 

In the world of economics, the U.S. is in the company of the UK, China, Russia, India, Australia, Japan and Sweden (to name a few) when it comes to 2020 fiscal debt. Below is a chart published by JP Morgan in their Weekly Asset View showing government debt to GDP in December 2019 and their projected fiscal deficit for 2020.
Meanwhile, the world’s major reserve currencies, including the USD, EUR, JPY, CHF and GBP are all stagnant between about 0% and -0.5%. While this could be read as investor comfort with these reserve currencies, JP Morgan’s analysts beg to differ, citing the record budget deficits, high starting levels of indebtedness and general concerns about sovereignty, inflation and fiscal irresponsibility.

 

Yet gold, “the world’s legacy reserve asset,” as JP Morgan points out, has made or is nearing all-time highs versus the aforementioned reserve currencies.
“…Take this gold move as a sign of eroding confidence in central-bank generated money generally, a trend that will probably continue until enough growth returns to put fiscal policy on a more efficient path,” states JP Morgan analysts.

 

However, some question whether economic growth will ever return in such a way as to “put fiscal policy on a more efficient path.” Is it possible that the world – U.S. included – could follow China’s policies of flooding their economies with debt, yielding defaults across the board? If this does occur, it would take exponentially more leverage to see even the smallest economic growth.

 

Regardless of whether gold’s run becomes significantly long term for this reason, it’s not likely to end any time soon. Even when the worst of the COVID-19 health crisis is over, we, and many other nations, will still be reeling from a level of economic damage that is sure to linger. And, as it typically does, gold will continue to rise in response.

 

Our confidence in many things has evaporated over the last several months, but it is still safe to place confidence in the yellow metal that has stood firm through pandemics, wars and the rise and fall of nations and empires throughout history. Physical gold is one of the oldest stores of value in the world and is still recognized and utilized globally for this purpose.

 

Contact me to learn more about gold as “the world’s legacy reserve asset” and why that means we can be confident in gold when we can’t be confident in much else.