In a recent note, Bank of America (BoA) warned that gold might be the last reliable safe haven for U.S. investors as the nation faces growing risks related to its surging national debt. According to the bank, gold has become more attractive than U.S. Treasury bonds due to the looming threat of a potential debt crisis.
Rising U.S. Debt Drives Gold’s Appeal
Bank of America highlighted that the U.S. national debt is expected to keep climbing to record levels over the next few years, putting increasing pressure on the country’s economy. This has shifted how gold responds to macroeconomic factors like lower interest rates. With these economic challenges, BoA predicts that gold will remain an appealing investment, projecting its price could rise to $3,000.
Throughout 2024, gold has consistently demonstrated its strength as a premier asset, frequently breaking all-time high prices. Currently, the metal is approaching $2,700, surpassing the $2,696 record it set in October. For many investors, gold is emerging as a superior option, especially as the risks tied to U.S. Treasury bonds become more evident.
Gold vs. U.S. Treasuries: A Safer Bet
The bank’s analysis emphasized that gold is now perceived as a safer bet than U.S. Treasuries, which have traditionally been viewed as secure investments. The primary reason for this shift is the potential debt crisis facing the U.S., exacerbated by the nation’s swelling debt load, which recently surpassed $35.7 trillion.
Bank of America also pointed out that neither of the two main U.S. presidential candidates appears willing to tackle the national debt issue. In fact, their proposed economic plans could further contribute to its growth, intensifying concerns about the country’s financial stability.
Growing Global Demand for Gold
With mounting debt concerns, Bank of America predicts a rise in global demand for gold, particularly from central banks. Over the past decade, central banks have been diversifying their currency reserves, increasing their gold holdings from 3% to 10%. This growing interest in gold is expected to push its value even higher, with the metal likely to hit new record highs before the end of the year.
