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Gold, Bitcoin Rally: Is US Debt Surge A Key Driver?

Published 01/03/2024, 16:46
Updated 01/03/2024, 18:10
© Reuters.  Gold, Bitcoin Rally: Is US Debt Surge A Key Driver?

Benzinga - by Piero Cingari, Benzinga Staff Writer.

A leading Wall Street investment strategist highlighted the exponential increase in the U.S. government debt as the primary cause for the continued rise of assets with finite supplies, such as gold and Bitcoin (CRYPTO: BTC), which appear to be on track to reach their all-time highs.

This insight was shared by Michael Hartnett, chief strategist of Bank of America, in his regular weekly note, “The Flow Show.”

Hartnett has laid bare a stark reality surrounding the surge in U.S. debt. “The U.S. national debt is rising by $1 trillion every 100 days,” Hartnett wrote.

He illustrated how the debt level has now surpassed $34 trillion, up from $33 trillion 106 days earlier, and approximately $32 trillion 90 days before that.

Following Hartnett’s projections, the debt is now expected to exceed $35 trillion by April 2024.

He claimed “financing domestic bliss and overseas wars U.S. budget deficits” over the last four years have equated to 9.3% of GDP.

Debt-Debasement Assets Thrive In This Context Therefore, Hartnett noted there is “little wonder why debt debasement” trades are nearing their all-time highs, referencing gold and Bitcoin, which are currently valued at $2,070 per ounce and $62,000, respectively.

Gold and Bitcoin are considered “debasement hedges” in times of monetary or fiscal policies that might cause significant currency devaluation.

Like gold, Bitcoin’s supply is capped, and both are considered stores of value, appreciating in value against currencies that may lack supply control due to central banks’ ability to print money indefinitely, at least in principle.

Since mid-February, the cryptocurrency price increased from about $50,000 to $61,600, a 22% rise, amid rising inflows towards Bitcoin-related ETFs. In February only, Blackrock’s iShares Bitcoin Trust (NASDAQ:IBIT) attracted nearly $5 billion of flows.

During the same timeframe, the precious metal, as tracked by the SPDR Gold Trust ETF (NYSE:GLD), climbed from $1,985 per ounce to its current price of $2,063 per ounce, an increase of 4%.

Read Now: Pro-Bitcoin President Nayib Bukele Trolls ‘Gold Bug’ Peter Schiff As El Salvador’s BTC Profit Soars 40%: ‘Cry Harder’

Photo: Shutterstock

© 2024 Benzinga does not provide investment advice. All rights reserved.

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