Following the Tax Cuts and Jobs Act, the Congressional Budget Office (CBO) is now projecting total federal debt to reach $33 trillion by 2028. CBO ten-year forecasts have historically underestimated future debt levels quite dramatically. In 2008, the CBO projection was for the 2018 total federal debt level to be $12.7 trillion versus actual $21 trillion. In 1998, the CBO forecast 2008 total federal debt of $6 trillion versus actual $10 trillion. Applying the same level of CBO forecast accuracy of the past 20 years, we get 2028 total federal debt of $50 trillion. The correlation of the total federal debt and the gold price over the past 45 years is 90%.
The stated intention by monetary policymakers to target 2% inflation rates stems from the need to service burgeoning debt levels with debased currency. Gold prices consequently are more aligned with total federal debt outstanding than the performance of the U.S. dollar versus other currencies.
Gold/US Dollar Index Inverse Relationship Non-Existent Over Time
Gold versus U.S. Dollar Index1 over the past 45 years shows the inverse relationship is non-existent over time as the U.S. dollar index measures against other fiat currencies that are constantly being debased.
Over the past ten years the inverse relationship shows up, but gold is still gaining versus paper currencies over this time period.
