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Reuters reported on July 15, 2022, that a dozen countries are at risk of defaulting on their loans in addition to Lebanon, Sri Lanka, Russia, Suriname, and Zambia that already are in default with many more at risk as borrowing costs and inflation rise on top of record debt levels around the world. @$$4$
This version of the original article by Equity Management Academy has been edited ([ ]) and abridged (…) for the sake of clarity and brevity to provide the reader with a faster and easier read.
- Just days before Russia invaded Ukraine, the World Bank issued a warning that the developing world was facing a debt crisis reporting that 70 low and middle income countries were facing debt repayments of $11 billion, which could easily overwhelm them. Then Russia invaded Ukraine and threw supply chains into turmoil. Oil prices skyrocketed.
- In March, the UN reported that 107 countries faced at least one of three crises: rising food prices, rising energy prices, or a tougher financial situation. 69 countries faced all three risks in Africa, Asia and Latin America.
- …The World Bank says that in the next year as many as 12 countries will not be able to service their debt. It will be the largest debt crisis in history. The entire world is in debt distress. Governments have to cut spending or borrow even more…
The Third World debt crisis is spreading and, today, we are looking at more than $400 billion that is threatened with default. As a result, gold is rising quickly…
We entered the stealth phase in the early 2000s…The awareness phase began when the institutional investors realized that the U.S. dollar would continue to decline, inflation would continue to increase and stay in the market as a consequence of all the money printing and gold rallied all the way up to more than $1,900 in 2011.
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Media attention [the beginning of the mania stage] is now beginning to focus on debt defaults, which should lead to a run on gold, only to find shortages in gold as we did back in 2020.
We now see:
- gold rising to above $3,000 and then it will enter the enthusiasm stage. The public will then rush in and gold will hit $4,000.
- Gold will then hit the delusion phase and in a new paradigm gold will hit $5,500 in 2024.
- After that high, gold will enter another bull trap and fear will drive gold down below $4,000.
- Gold will then return to its mean at about $1,500 to $2,000.
[How things pan out, however,] will depend on how the Fed tries to adjust interest rates. The 10- and 2-year notes are now inverted, with the shorter-term note trading higher than the longer note. If the inversion occurs on the 30-year bond, too, it will be a strong indication that we are entering a deep recession. This is a generational opportunity in gold to make some significant profits.
Conclusion:
As we take a look at the chart above, we can see that:
- Gold is currently entering the Mania Phase. As the Third World Debt Crisis increases, gold will play a major role in the monetary system. Price discovery will overtake the price suppression and manipulation by the central banks.
- The Media attention phase will develop further as the data begins to come in regarding Latin American debt defaults that could precipitate a massive run to gold only to find a shortage of physical supplies.
- This could perpetuate the acceleration of the Enthusiasm phase due to the public and retail demand.
- That could ignite greed and delusion into a blow-off phase within a peak in gold of over $5000 in 2024.
