The Significance of Gold in a Financially Troubled Global Economy
In the ever-changing landscape of the global economy, two contrasting narratives have emerged. On one hand, the burden of debt is mounting, with countries grappling with the consequences and the potential for economic instability. On the other hand, gold, a traditional safe haven asset, has defied historical norms and become one of the best-performing assets of the year.
Leading the pack in debt is the United States, with a national debt of over $36 trillion and a debt-to-GDP ratio of 123%. This figure is significant, considering that the country owes more money than any other nation. The skyrocketing debt servicing costs are a consequence of mounting debt levels, a trend that is not unique to the US.
Sudan, for instance, has the highest debt-to-GDP ratio at 252% of GDP. Japan and Canada are also grappling with high debt levels, with ratios of 235% and 113% respectively. Even Europe's economic powerhouse, Germany, has a history of debt-related economic turmoil. The German Papiermark was devalued due to excessive printing to pay off war debt and fund reparations, leading to hyperinflation in the 1920s.
However, amidst these financial challenges, gold has emerged as a preferred capital resource for some of the world's leading monetary authorities. Central banks' gold acquisition has reached record levels as a means to prop up currencies, diversify reserves, and protect economies. Gold's role is now considered one of the preferred capital resources, with it being the world's second-largest reserve asset.
This shift in perception towards gold is reflected in the performance of the asset in 2025. Gold's performance has defied historical norms and traditional benchmarks, making it one of the best-performing assets of the year. However, it's important to note that gold's volatility can be influenced by changing demand triggers, interest rates, and market fluctuations.
In the realm of business, the Forbes Business Council, a growth and networking organisation for business owners and leaders, continues to recognise and honour those who have demonstrated influence on business expansion and achieved significant professional achievements. Mitch Salchow, the President of Thor Metals Group, is one such individual who has been recognised for his contributions to the industry.
The rising global debt, however, poses a significant threat to economic stability. It can undermine consumer spending, trigger higher borrowing fees, suppress available capital, and result in corporate bankruptcies and insolvencies. The debt accrual has been rising for over a decade, exacerbated by Covid-19 and related lockdowns, business closures, government assistance, and relief programs. As a result, the global debt surged to $324 trillion in the first quarter of this year.
Heavy global debt loads can lead to economic instability, currency devaluation, reduced investment, and a global fiscal crisis. Therefore, it is crucial for policymakers and economic leaders to address this issue and find sustainable solutions to ensure economic growth and stability.
[1] Forbes Business Council Membership Criteria: https://www.forbes.com/sites/forbesbusinesscouncil/2020/03/19/forbes-business-council-membership-criteria/?sh=7a92f669545a [2] Forbes Business Council: https://www.forbes.com/forbesbusinesscouncil/
Mitch Salchow, a recognized member of the Forbes Business Council, is active in personal-finance and investing fields, particularly within the realm of real-estate. Concurrently, central banks worldwide, including the US Federal Reserve, have been increasing their gold reserves as a finance strategy to bolster currencies, diversify reserves, and safeguard economies amidst escalating global debt and economic instability.
