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Jun 11, 2023

Visualizing Gold Price and U.S. Debt (1970

Published on By Gold has long been considered a store of value and a hedge against economic uncertainty. Over the past five decades, its price has been closely intertwined with concerns surrounding

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Gold has long been considered a store of value and a hedge against economic uncertainty.

Over the past five decades, its price has been closely intertwined with concerns surrounding the growing U.S. public debt.

The graphic above uses data from In Gold We Trust and the Federal Reserve Bank of St. Louis to explore the relationship between gold price and the U.S. national debt.

The U.S. national debt is the amount of money the federal government has borrowed to cover the outstanding balance of expenses incurred over time.

Every fiscal year, if spending exceeds revenue, the federal government borrows money by selling marketable securities such as Treasury bonds, bills, notes, floating rate notes, and Treasury inflation-protected securities (TIPS) to cover the deficit.

The American public debt has risen annually since 1970, except in 2000, when it decreased by 2% due to factors like robust growth and a budget surplus.

Over the last few decades, the national debt has grown from around $370 million in 1970 to an all-time high of $31.4 trillion in 2023, recently sparking the debate in Congress to increase the debt ceiling to avoid a potential default.

The number is even higher if considering federal unfunded liabilities. Those are future financial obligations that the government has committed to but lacks sufficient funds to fully cover, such as Social Security and Medicare. Taking those into consideration, the current present value of the fiscal imbalance is $244.8 trillion, almost 10 times the current U.S. GDP.

A rising US debt often leads to concerns about inflation. When a government accumulates a significant amount of debt, it may resort to measures such as printing more money or increasing government spending, potentially leading to inflationary pressures. In such situations, investors may turn to gold as a hedge against inflation.

In addition, as the federal debt levels rise, investors may become wary of the stability of financial markets and seek safe-haven assets such as gold.

Although the price of gold tends to rise as U.S. debt increases, numerous other factors can also influence the market, including market sentiment, central bank policies, and global economic conditions.

Sizing Up: The Oil Market vs Top 10 Metal Markets Combined

Visualized: Real Interest Rates by Country

Sizing Up: The Oil Market vs Top 10 Metal Markets Combined

Charted: Commodities vs Equity Valuations (1970–2023)

200 Years of Global Gold Production, by Country

Silver vs. Stocks: Comparing Performance During Recessions

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Mapped: U.S. Mineral Production Value by State in 2022

Global silver demand is poised to soar in the next decade, driven by emerging technologies like EVs and solar power.

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Global silver demand is poised to soar in the next decade, driven by emerging technologies like electric vehicles and solar power.

Silver demand from solar alone has grown from less than 50 million ounces (Moz) a decade ago to an expected 160 Moz in 2023.

So, where will the necessary supply come from to meet this surge? This graphic from Discovery Silver shows the largest undeveloped silver deposits in the world.

Silver is a vital part of solar cells. The metal is converted into paste and coated onto silicon wafers to make solar arrays.

When sunlight hits the silicon, silver helps to transport the generated electricity for immediate use or store it in batteries. A typical solar panel can contain as much as 20 grams of silver.

Silver’s conductivity and corrosion resistance are vital in electronics, especially electric vehicles where nearly all electrical connections rely on the metal. Over 50 million ounces of silver are used every year to enhance conductivity in powered seats, windows, and other vehicle electronics.

In 2022, 27% of all silver consumption in the U.S. was attributed to electrical and electronics, while 10% was linked to solar technology.

With the increasing demand for new technologies combined with physical investment (bars) demand, the silver market saw a 237.7 Moz deficit in 2022, an all-time record.

2023 silver industrial demand is forecasted to rise by 4% to a new record high.

However, according to the Silver Institute, mined output is expected to decline over the next five years.

In this scenario, new mines are expected to play an important role in meeting the demand.

Currently, the world’s top 10 undeveloped silver deposits contain 984 Moz. Discovery Silver’s Cordero project in Mexico leads the ranking:

Cordero is located in Chihuahua State in Mexico, one of the world’s most prolific silver producing regions.

Once in production, it is expected to become one of the top three silver mines in the world.

As silver demand is expected to soar, Discovery Silver offers direct investment exposure to this paradigm shift through its Cordero Project. Click here to learn more about Discovery Silver.

This infographic puts the oil market’s size into perspective by comparing it to the top 10 metal markets.

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While the global economy relies on many commodities, none come close to the massive scale of the oil market.

Besides being the primary energy source for transportation, oil is a key raw material for numerous other industries like plastics, fertilizers, cosmetics, and medicine. As a result, the global physical oil market is astronomical in size and has a significant economic and geopolitical influence, with a few countries dominating global oil production.

The above infographic puts crude oil’s market size into perspective by comparing it to the 10 largest metal markets combined. To calculate market sizes, we used the latest price multiplied by global production in 2022, based on data from TradingEconomics and the United States Geological Survey (USGS).

Note: This analysis focuses on raw and physical materials, excluding derivative markets and alloy materials like steel.

In 2022, the world produced an average of 80.75 million barrels of oil per day (including condensates). That puts annual crude oil production at around 29.5 billion barrels, with the market size exceeding $2 trillion at current prices.

That figure dwarfs the combined size of the 10 largest metal markets:

Based on prices as of June 7, 2023.

The combined market size of the top 10 metal markets amounts to $967 billion, less than half that of the oil market. In fact, even if we added all the remaining smaller raw metal markets, the oil market would still be far bigger.

This also reflects the massive scale of global oil consumption annually, with the resource having a ubiquitous presence in our daily lives.

While the oil market towers over metal markets, it’s important to recognize that this doesn’t downplay the importance of these commodities.

Metals form a critical building block of the global economy, playing a key role in infrastructure, energy technologies, and more. Meanwhile, precious metals like gold and silver serve as important stores of value.

As the world shifts towards a more sustainable future and away from fossil fuels, it’ll be interesting to see how the markets for oil and other commodities evolve.

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