Gold has soared this year and is enjoying its best run since 1979. SPDR Gold Trust (G.L.D. 0.55%) It is up more than 32% and is outperforming the broader market bull run. Gold has likely benefited from geopolitical tensions in Ukraine and the Middle East, which have created a lot of uncertainty.

Gold can also serve as a hedge against inflation. But I also think that the impending US presidential election and the country’s finances could have something to do with the rise of gold. Whether Vice President Kamala Harris or former President Donald Trump triumphs on November 5, I predict gold will continue its impressive run.

Here’s why.

Tax recklessness

In recent weeks, some of the most prominent investors have revealed investment positions and theses that contradict conventional wisdom. Billionaire investor Stanley Druckenmiller revealed that he owns significant bets against US Treasury bonds. Another billionaire investor, Paul Tudor Jones, said on CNBC that “All roads lead to inflation.“.

The statements seem counterintuitive to current economic data, which generally suggests that inflation is declining, although not always linearly. However, Druckenmiller and Jones are concerned that the US government has lost control of its finances. Now, this isn’t exactly a remake.

The US gross national debt is approaching $36 trillion, and the federal deficit for fiscal year 2024 now exceeds $1.8 trillion. debt with gross domestic product (GDP) is 124%. This means that the government spends a ton of money each year to make interest payments to maintain the debt. This year, the government has spent $882 billion on interest payments, or 13% of total budget spending.

Investors like Druckenmiller and Jones worry that the situation will soon (if not already) become unsustainable and spread to the bond market. Regardless of who wins the election, Harris and Trump are expected to try to implement policies that could be inflationary and worsen the country’s financial situation.

The nonpartisan Committee for a Responsible Budget projects that Harris would increase the national debt by $3.5 trillion through 2035, based on the central case of her analysis. Trump would increase the national debt by $7.5 trillion.

The Wharton School of the University of Pennsylvania budget model estimates that US debt to GDP cannot exceed 200%. No amount of tax increases or spending reductions could prevent a default at that level, and this type of default would be larger and more damaging than ever.

Why will gold continue to rise?

Gold is likely to benefit from fiscal uncertainty that will only worsen unless policymakers act. However, it is unclear whether lawmakers will be able to fix the situation, given how large the debt has become and how many problems there are to address in the U.S. If bond investors begin to doubt the government’s ability to pay its debt, bonds will fall and bond yields will rise, which could lead investors to flock to a safer physical asset, such as gold.

Whether that will happen remains to be seen. Jones also said he believes the government will essentially have to inflate its way out of this situation by keeping interest rates low, raising inflation and then generating nominal growth that is above inflation.

Gold is seen as key. inflation hedge. Between fiscal uncertainty, the fact that the future president will likely exacerbate debt problems, and the path to potentially correcting these problems, gold should continue to rise regardless of who wins the election.