Investors Will Want to Own Gold as ‘America Faces a Debt Reckoning’

(Kitco News) - One of Toronto’s oldest boutique investment firms is warning investors that gold could be a good asset to own as the world faces significant threats in the coming months and years.

In his latest research report, John Ing, president and CEO of Maison Placements Canada, said he is looking for gold prices to rally to $2,200 an ounce as the chickens, raised on decades of uncontrollable spending, come home to roost.

Ing said in his latest commentary that they believe “mounting inflation, de-dollarization, heightened geopolitical risks, global debt and the rise in populism” provide a positive backdrop for gold: “it is a good thing to have.”

According to Ing, the biggest factor behind most of the global economic threats comes down to growing debt problems in the U.S. Ing noted that since 2008, the supply of Treasuries has risen five-fold to more than $25 trillion.

This fiscal year saw deficit spending in the U.S. rise by $1.7 trillion, pushing the debt past $33 trillion. “America faces a debt reckoning,” Ing warned.

Despite the growing threat, Ing noted that the U.S. government continues to spend money at a record pace as it pushes the transition to green energy to meet global carbon dioxide reduction targets. He described the green energy transition as a black hole: “Once you are in it, it is impossible to get out.”

“[President Joe] Biden’s Green Deal is something between a mirage and boondoggle as high interest rates, permit delays and supply problems become the new reality,” he said.

Ing also noted that the U.S. government’s debt makes it more challenging for America to provide a stable force as the world starts to fracture in the face of two major conflicts.

“As America's military arsenal runs low, it is an inconvenient fact that arming itself will prove very costly,” he said. “The strength of the American economy was one of the main reasons the US won the Cold War with Russia, allowing them to build a global defense behemoth which the Soviet Union could not match. America’s overconfidence led to arrogance and now complacency.”

America’s massive debt is also taking its toll on the U.S. dollar as the deglobalization trend is also prompting nations to diversify away from the greenback.

“The biggest threat to the dollar comes not from others but from the US government itself,” he said. “And that is a worry because the burden of debt is America’s Achilles heel.”

At the same time, Ing said that the selloff in bond markets has only begun as investors are reluctant to expose themselves to more U.S. debt.

“A meltdown in Treasuries now ranks among the worst Treasury crashes in history with 10-years collapsing 46% in the last three years while the 30-year bond erased 53% of gains. The meltdown has just begun,” he said. “America’s addiction to low rates and profligate spending debases the dollar, eroding its dominance, central to America’s credibility in financial markets.”

“We believe this fiscal unsustainability will show up in even higher yields and pain, from the shopping cart to corporate balance sheets, to taxpayers, as those chickens are only coming home to roost.”

In this environment, Ing said that gold remains a buying opportunity as it will help investors preserve their capital.