By The Hard Assets Alliance Team
Gold is back.
Last September, after drifting around $1,600 an ounce for eleven straight months , gold rose above its 200-day moving average and into an official uptrend. Today, that trend is still intact and the next phase of the gold bull market is underway.
The question now is whether this is a fleeting summer fling – or the start of the next phase in our sector?
We think this is just the beginning for gold and silver. We may see some consolidation or even a pullback due to potential seasonal weakness, or some “price fatigue” after such a big advance, but our bullishness has little to do with seasonality or short-term price surges.
Here’s what supports our outlook:
Source: Hoisington Investment Management Company
This data has rendered us numb to incomprehensibly large numbers – yet US debt and liabilities continue to grow unabated. In Q2 2012 alone, for every $1 added to GDP, we added more than $2 in debt. This is a fundamental reason we remain convinced the US can’t grow its way out of its financial hole.
Historical precedent also supports our conviction. Since 1800, a study of 26 countries with debt overhangs that lasted five or more years showed that the subsequent drag on the economy – below average or negative growth – lasted 23 years on average. A “debt overhang” is defined as a period where public debt-to-GDP exceeds 90% – the US is way beyond that. There simply won’t be sufficient revenue generated for the debt and promises to be paid in anything near the purchasing power of today’s US dollar.