In the current economic climate, many investors are turning to gold as a hedge against a troubled economy. With consumer, federal, and corporate debt at all-time highs, the potential for economic turmoil and market instability is a real concern. In this article, we will explore why the combination of consumer, federal, and corporate debt makes gold an attractive hedge against a troubled economy.
Consumer Debt
Consumer debt has been on the rise for years, with credit card debt, student loans, and auto loans all reaching record levels. When consumers are saddled with debt, they have less disposable income to spend, which can lead to a slowdown in economic growth. If consumers begin defaulting on their loans, it could lead to a broader economic downturn.
Federal Debt
The federal government has also been racking up debt, with a national debt of over $28 trillion as of March 2023. This level of debt is unsustainable and could have serious consequences for the economy, including inflation, higher interest rates, and reduced economic growth.
Corporate Debt
Corporate debt is also at record levels, with many companies taking advantage of low interest rates to borrow money. While this can be a good way for companies to grow, it also puts them at risk if interest rates rise or if the economy takes a downturn.
Why Gold is an Attractive Hedge
Given the potential risks associated with high levels of consumer, federal, and corporate debt, many investors are turning to gold as a hedge against economic turmoil. There are several reasons why gold is an attractive hedge:
- Gold is a tangible asset that has been used as a store of value for centuries. Unlike paper currencies, gold has intrinsic value and cannot be easily inflated or devalued.
- Gold has historically maintained its value during times of economic turmoil and market instability. During the Great Recession, for example, gold prices surged as investors sought out safe-haven assets.
- Gold is a low-correlation asset, meaning that its performance is not closely tied to the performance of other asset classes, such as stocks or bonds. This makes it an effective way to diversify a portfolio and reduce overall risk.
Adding Gold to Your Portfolio
If you are concerned about the potential risks associated with high levels of consumer, federal, and corporate debt, adding gold to your portfolio may be a smart move. At Callahan Assets, we’re here to help you rollover a portion of your IRA portfolio into gold and silver bullion.