Bible Science Forum

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The US National Debt Predicts Gold and Silver Price Break Outs

The US National Debt has reached $34 trillion, showing correlations with gold and silver prices. The debt’s increase predicts a future breakout in metal prices.

John Gideon Hartnett
7–11 minutes
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Photo by RDNE Stock project on Pexels.com

The United States Total Public Debt or the National Debt has reached $34 Trillion. The red curve (1) in Chart 1 shows its accumulation since 1966. Note the two rapid increases after the 2008 GFC and the 2020 COVID pandemic. These are important to understanding any correlation with gold and silver prices. In this piece I want to answer the following question. What can the US National Debt tell us about gold and silver prices? Can it predict their break out?

Chart 1: US National Debt, Total Public Debt data downloaded from FRED, red curve (1) on a linear scale. The National Debt normalised to 1959 dollars using the M2 money supply is shown in blue curve (2).  This means the effects of dollar devaluation are stripped out in blue curve (2). The sepia strips indicate recessions.

Using the dollar deflation derived from the M2 money supply growth we can strip out the effects of inflation. This was shown in The CPI Inflation Rate Compared to the M2 Money Supply Growth.

Below the same data from Chart 1 are shown in Chart 2 on a log-linear plot.

Chart 2: US National Debt, Total Public Debt data downloaded from FRED, red curve (1) on a log-linear plot. The National Debt normalised to 1959 dollars using the M2 money supply is shown in blue curve (2). The effects of dollar devaluation are stripped out in blue curve (2).  The dashed curve (1) is an exponential fit to the National Debt data. On a log plot an exponential curve appears as a straight line. The solid curve (2) is a linear fit to the National Debt data that has been normalised to 1959 dollars. The sepia strips indicate recessions.

Chart 2 shows more clearly the trends associated with the accumulation of the debt as a function of time. Curve (1) is an exponential function and curve (2) is a linear function. After stripping out the effects of inflation using the devaluation of the dollar as determined from the M2 currency supply we get the blue data, the National Debt in 1959 dollars. Now we are comparing “apples with apples”. This is reproduced in Chart 3.

Chart 3: US National Debt normalised to 1959 dollars from Chart 2 is shown in the blue data on a linear scale plot. The effects of dollar devaluation have been stripped out. The dashed curve (1) is the linear trend in the National Debt data normalised to 1959 dollars. The sepia strips indicate recessions.

In Chart 3 we see two significant humps centred on 1994 and 2012; the two periods when the National Debt was massively increased.

What happened in the 1990s and the 2010s that suggest a big increase in real terms in the National Debt? That was followed by periods where the debt was paid down a little. It is this general shape of the debt that we need to look for when comparing it to the growth in the prices of gold and silver.

In the following we use the National Debt in 1959 dollars (blue curve in Chart 3) compared to the normalised gold price (Chart 4) and the normalised silver price (Chart 5).

Chart 4: US National Debt normalised to 1959 dollars from Chart 3 is shown in blue curve (1) on a linear scale plot. This is compared to the price of gold ($/oz) also normalised to 1959 dollars using the M2 currency supply and shown as the red data (2). In order to present the National Debt on the same chart it was scaled by a factor of 18.545/206100 to be equal to the gold price in 1970. The solid horizontal line is the 1959 gold price of $35.10. The descending solid line just touches the peaks of the gold price data. The sepia strips indicate recessions.

Before 1970, as far as the data show, the National Debt with inflation stripped out is tightly correlated with the price of gold. Between 1973 and 1990 there seems to be a general correlation if we ignore the peaks. After 1995 the normalised National Debt data is quite well correlated with the price of gold.

Chart 5: US National Debt normalised to 1959 dollars from Chart 3 is shown in blue curve (1) on a linear scale plot. This is compared to the price of silver ($/oz) also normalised to 1959 dollars using the M2 currency supply and shown as the green data (2). In order to present the National Debt on the same chart it was scaled by a factor of 1.0023/206100 to be equal to the silver price in 1970. The solid horizontal line is the 1959 silver price of $0.90. The descending solid line just touches the peaks of the silver price data except in 1980. The sepia strips indicate recessions.

The National Debt with inflation stripped out displays similar correlations with the price of silver as it did with the price of gold. The gold price shows stronger correlation.

In Chart 6 both gold and silver prices are shown on the same chart with the National Debt using 1959 dollars. The silver price and the National Debt are scaled so they can be shown on the same chart, as described in the caption.

Chart 6: The price of an ounce of gold (red) and an ounce of silver (green) in 1959 dollars on Log-Linear axes. The gold price ($/oz) axis is logarithmic and the time (year) axis is linear. The solid horizontal line is the $35.10 price of an ounce of gold from 1959. The silver price has been converted to an equivalent gold price by the factor 35/0.9 = 38.9. In order to present the National Debt on the same chart it was scaled by a factor of 18.545/206100 to be equal to the gold price in 1970 and is shown as the black curve. Between 1959 and 1970 the data are sparse. The sepia strips indicate recessions.

Before 1970 the National Debt and the gold price are correlated as much as the limited data show. The silver price is not so well correlated. This may have something to do with the fact that silver has not been a monetary metal since 1873 with the passing of the Coinage Act. After that it lost some of its “moneyness”.

From 1970 to 1995 we see a strong rise in the National Debt, in fact it peaked in 1994. Over the same period we see a strong rise in the price of gold after Nixon decoupled US dollars from being exchangeable for gold. The silver price closely followed the gold price, which means it is still being valued as a monetary metal.

After the gold window was closed in 1970 up to 1995 there may have been a reaction to going off the gold standard. The prices of gold and silver displayed strong rallies and sell-offs not reflected in the National Debt levels, though the overall increasing trends are the same, if we ignore the peaks.

From 1995 to 2023 we see a correlation between the National Debt and the price of gold and of silver. As the debt falls the precious metal prices fall and as the debt rises and falls again we see the same trend in the precious metal prices. Thus an increase in the National Debt in real terms goes with an increase in the metals’ prices, all priced in 1959 dollars.

After 2021 the National Debt began increasing significantly and is correlated to the rise in the real gold price. This is clearly seen in Chart 4 on linear axes. Therefore we can predict the real price of gold will increase proportionally to the National Debt. To convert it to the current dollars we only need to multiply that by the amount of devaluation of the dollar since 1959.

From that it follows that the gold price (red data labelled (2) in Chart 4) must break out of the triangle it is being squeezed into with apex in May 2026. And it must be a positive increase as the National Debt will never decrease again, not even when the dollar dies.

The same is true for silver (green data labelled (2) in Chart 5). Above 2021, though the silver price increase is not so pronounced, there is the same correlation with the rise in the National Debt. The silver price will also break out of the triangle it is being squeezed into with apex in June 2025. And it must be to the upside because the National Debt can never decrease again. It must increase in real terms as priced in the same 1959 dollars.

From a human action stand point this makes sense. As the National Debt was increased in real terms after the 2020 pandemic more buyers entered the market buying gold and silver to protect their wealth from what they fear is coming, that is, that the market may break leading to the crack up boom. This may be more clearly seen in the period after 2008 (GFC depression). A strong rise in the metals prices when the National Debt was rapidly increased.

A similar reason could be argued for the 1970 to 1995 period. Uncertainty after the decoupling from gold caused many to speculate in the metals market at the same time the National Debt was being expanded to fund the military industrial complex and bigger government. A result of closing the gold window was a lot more currency printing.

In conclusion, I believe we can safely predict that gold and silver prices must break out to the upside within roughly 2 years. But could happen before. The gold price reaches its apex near the middle of 2026. The metals’ prices must break out to the upside because they are correlated with the National Debt that must be increased, never decreased. It is impossible to decrease it, before the dollar dies.

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One response to “The US National Debt Predicts Gold and Silver Price Break Outs”

  1. Pets to Go Avatar
    Pets to Go

    I simply want to say, ‘Thank you’ John for all your research and efforts in posting the information you do. Sometimes, that takes great courage. With kindest regards, Mrs. Jane Blakey.

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