The US deficit widens – good news for gold

According to a report published by Bloomberg on Wednesday, the first half of fiscal 2019 has seen the US deficit soar with the gap reaching a mammoth $691 billion as government spending swamped revenue and the country started to feel the pinch of President Trumps tax cuts combined with an aging American population.

The Treasury Department says that the increase is 15% higher than the same period 12 months ago. There have also been whispers of course that the USA could be heading into a period of recession making the deficit all the more troubling for those in the White House.

As The Balance explains, a budget deficit isn’t immediately a bad sign because it means the government is investing in the economy and other countries are more willing to lend to the country. When the debt reaches a certain level however, the economy slows, interest increases and that can spell recession.

Kimberley Amadeo, the president of World Money Watch, published author and regular on Fox Business Network is a US economy expert. She says that the deficit is out of control and notes, “The government should be reducing the deficit in an effort to lower the debt. Deficit spending in a healthy economy will make it overheat. An economy that’s churning too fast creates a boom and bust cycle. It always leads to a recession.”

For investors however, this news could be a green light to buy gold – if a recession is incoming, fiat currencies lose their value, but gold thrives as an asset class. It’s a stable asset even when markets are in turmoil and consumer confidence falls.