Why US public debt increased year-over-year in FY14

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Dec. 4 2020, Updated 10:52 a.m. ET

U.S. public debt

U.S. public debt is the amount owed by the federal government in terms of outstanding treasury securities.

What is debt to GDP?

Debt to gross domestic product (or GDP) is the ratio that shows how much a country owes compared to how much it earns. Investors use the ratio to measure a country’s ability to make future payments on its debt. This impacts the country’s borrowing costs and government bond yields.

How does ballooning debt or GDP impact gold prices?

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The above chart shows that the U.S. public debt to GDP continues to increase. The main concern regarding ballooning debt is that as it rises beyond a certain point, the country will have to increase taxes and cut spending in productive areas to service the interest costs. This would be negative for economic growth. If the economic prospects aren’t bright, people don’t have many options to fall back on. Gold is one of those options.

U.S. public debt growth

U.S. public debt grew from $16.738 trillion at the end of fiscal year 2013—September 30—to $17.824 trillion at the end of fiscal year 2014. This is a growth of $1.086 trillion. For fiscal year 2013, the growth was $671.94 million.

U.S. debt to GDP—using GDP for June 2014—for September 2014 was 102.9%. This is high compared to the historical figures. Although the federal budget balance improved in the fiscal year ending in September, the debt figure grew.

This is negative for the U.S. dollar’s (or USD) long-term profile. The USD impacts gold prices. Gold prices have an impact on gold companies like Goldcorp (GG), Barrick Gold (ABX), Newmont Mining (NEM), and gold-backed exchange-traded funds (or ETFs) like the SPDR Gold Shares (GLD). They also impact ETFs investing in gold stocks—like Gold Miners Index (GDX).

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