Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
The ballooning US debt crisis will support higher gold prices in the medium to long term, according to UBS. The investment bank highlights that macroeconomic factors are the driving force behind the yellow metal’s record-breaking growth in 2024. Regardless of which candidate wins the presidential election, UBS doesn’t see the fiscal deficit improving, ensuring gold’s rally has plenty of fuel moving forward.
The Debt Driver
The alarming state of national debt is the crux of UBS’ bullish outlook on gold. Currently, the country faces a $35 trillion debt crisis, spurred on by trillion-dollar omnibus spending packages, endless money printing, and adherence to the experimental Modern Monetary Theory (MMT). With no solutions in sight, experts predict US debt to reach $56 trillion in the next decade.
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At the same time, the government’s ability to repay that debt is deteriorating with debt-to-GDP levels sitting near historic highs. This key metric of debt sustainability is also expected to rise. The University of Pennsylvania projects debt levels to account for 190% of GDP by 2050, suggesting the potential to resolve the debt debacle is increasingly out of reach.
Macro Factors Push Sustained Growth
In an interview with Bloomberg, UBS strategist Joni Teves zooms in on the macroeconomic factors primarily responsible for gold’s upward momentum. While acknowledging the potential for “knee-jerk” price swings based on headlines, she encouraged investors to look at the quieter yet more influential drivers of the rally. More specifically, UBS underscores the Federal Reserve’s easing cycle, escalating geopolitical tensions, central bank demand, and US debt as foundational to gold’s growth.
The Election Doesn’t Matter
When asked how the presidential election could impact gold prices, Teves suggests that the results of the hotly contested race wouldn’t really matter. Instead, she zeroed in on the country’s fiscal position, indicating that investors care more about the economic impact of the race, rather than who wins. “The expectation that the US fiscal deficit is going to deteriorate, regardless of who wins, is seen to be positive for gold over the medium to long term.”
This point is reinforced by Scottsdale Bullion & Coin’s (SBC) Precious Metals Advisor Joe Elkjer. “This is a problem that will NOT be fixed by an election. The problems are going to remain for the dollar after the election happens.”
Gold Going, Going Up
As gold nears all-time highs, some investors worry about chasing the rally. UBS remains optimistic about prices, suggesting “From a broader perspective…the macro backdrop is supportive for gold.” In fact, the group has raised its gold price forecast, along with a growing number of experts. Furthermore, the bank indicates that “physical demand is quite resilient even at higher prices. Central banks have led the current gold rush with record-shattering demand through 2022, 2023, and in the first half of 2024.
Don’t Get Left Behind
UBS strategist Joni Teves highlights how most investors have been playing catch up with gold prices throughout 2024. “Gold moved very quickly at the beginning of the year [and] left a lot of investors…behind.” She continues by highlighting the brevity of the yellow metal’s pullbacks and the diminishing window of opportunity investors have to snag gold at relatively low prices.
“This is a time of opportunity…not [a time] to take your foot off the gas.”– John Karow, Precious Metals Advisor at SBC Gold