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Consumers Are Digging Themselves Deeper Into Debt—And the Clock Is Ticking

AngelaRoberts

Written by Angela Roberts

Dec 7, 2023

In the past week, gold has eclipsed its previous all-time record high price, and analysts are expecting that rise to continue into 2024 as geopolitical tensions and concerns over interest rates help boost gold’s appeal. For those of us who have already made the move to add physical gold to our portfolios, this is a chance to pat ourselves on the back and enjoy the additional protection and growth potential gold is currently offering.

However, as regular readers of “Gold News & Views” know, I can never stay away from financial news for long. If there’s anything that could impact my savings, retirement, or the portfolios of our U.S. Money Reserve clients, I want to know about it as soon as possible and pass that information on to you—especially if it could mean even greater demand for gold.

For example: Consumer spending is one of the main drivers of our economy, but it’s been increasingly backed by consumer borrowing. Right now, credit card debt and other forms of borrowing are ballooning at a rate some analysts are calling “unsustainable.”

As you’ll soon see, this may become a major market factor, impacting consumer portfolios and, in turn, helping support record high prices for physical gold.

The size of consumer debt is growing drastically.

Credit cards

According to data from the Federal Reserve Bank of New York, the balances on “non-housing loans” have more than doubled in the last 20 years, reaching $4.8 trillion by the end of Q3 2023. More than $500 billion of that debt was accumulated in just the past couple of years. Credit card debt alone has grown to a record $1.08 trillion.

Unfortunately, consumers’ ability to pay back this debt appears to be shrinking. According to Ned Davis Research, there has been a “widespread” rise in loan delinquencies over the past year. And as we saw during the subprime mortgage crisis of 2008, a sharp rise in consumers’ inability to pay their loans could have a major effect on our economy.

Growing debt and delinquencies could lead to a sharp drop in consumer spending.

Shopping bags being carried by two women walking

If you were watching the headlines after Thanksgiving, you would have seen that a record number of consumers spent a record amount of money over the Black Friday weekend, with Adobe Analytics reporting that online spending alone reached $38 billion between Thanksgiving and Cyber Monday. But with more Americans falling behind on their loan payments, that trend of spending may soon come to a screeching halt.

Erik Lundh, a principal economist at The Conference Board, says that “headwinds are going to eventually force the consumer to buckle…. At a certain point, this debt [will] become unsustainable, and there [will be] no more savings left. And that’s what we expect probably to happen to the U.S. consumer toward the end of this year and into early 2024.”

Here’s why this matters: Consumer spending makes up around two thirds of our nation’s GDP, according to the Bureau of Economic Analysis. A sharp drop in consumer spending could have a cascading effect on the economy, especially for stock prices. And where stocks go, consumer portfolios heavily allocated to stocks may follow.

It’s not too late to benefit from the latest surge in gold prices.

In just the last week, gold prices have reached new all-time highs in intraday trading. If consumer debt continues to balloon out of control, and other factors like geopolitical uncertainty and concerns over interest rates also continue as expected, we may soon see gold prices reach even greater highs and establish a new plateau from which to grow in the future.

Just think about what these new record high prices mean for those who purchased gold 20 years ago, when prices were under $400/oz. Now look at the world today and imagine where gold might be in another 20 years.

No one can say for certain what the future holds, but gold’s potential for further growth, along with the potential impact of a consumer debt crisis on your portfolio, is why I strongly encourage you to call U.S. Money Reserve today and speak to one of our Account Executives about protecting your wealth and retirement with physical gold.

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