Macro Expert: Gold and Bitcoin Poised for Significant Gains

Macro investor Luke Gromen says gold and Bitcoin could emerge as big winners from the US government debt problem. In an environment where the US government is forced to inflate its debt, Gromen sees opportunities for Bitcoin and gold.

America needs negative rates

In conversation with David Lin, Luke Gromen indicates that he believes America needs negative real interest rates to get its financial house in order.

Historically, he believes this creates a bullish scenario for gold and will probably also be optimal for the Bitcoin price.

“I think gold and Bitcoin are both well positioned if you get into a regime where the most powerful country in the world […] cannot pay its debts without negative real interest rates,” Gromen said.

According to Gromen, this is also the reason for decoupling the relationship between the gold price and US real interest rates.

Decoupling the gold price from real interest rates?

At the time of writing, there is a positive real interest rate in America. That is, the interest rate on government bonds is currently higher than inflation, which means that investors can beat inflation by simply choosing government bonds.

Normally, that is not a favorable climate for gold. The gold price does well when there are negative real interest rates. When interest rates are lower than inflation, which forces investors to look for other assets for returns.

Now, however, gold is making all-time highs, while investors can also theoretically beat inflation “risk-free” with government bonds.

The fact that the gold price is making all-time highs under these circumstances, which are normally bearish for the precious metal, is, according to him, a signal that the market has no confidence in the long-term value of the US dollar; which is of course the result of the government’s unsustainable debt position.