Rick Rule, veteran investor and president and CEO of Rule Investment Media, said the only way for the U.S. to get out of its current debt crisis is to erode the real value of its debt through inflation, just as happened in the 1970s. This dynamic creates a bullish case for gold, copper and energy resources under the next U.S. administration.

According to Rule, the U.S. will eventually meet its debt obligations in nominal terms but let inflation erode the real value of those debts, as happened in the 1970s.

“We faced a similar situation in the 1970s, although it was less severe then, where we would meet the nominal amount of our debt but we would reduce the present value of that debt through inflation,” Rule said.

Rule highlighted the worrying growth in the size of the U.S. debt, noting that the deficit has increased by $1 trillion since just a few months ago.

“In the 1970s, the last time we had this, the dollar lost 75% of its purchasing power,” Rule said. “Not coincidentally, during that time, gold went from $35 an ounce to $850 an ounce. Yes, those two things are related, and the only way I understand we’re going to get out of this debt crisis is through inflation.”

While the U.S. economy appears healthy on the surface, Rule believes this is largely due to easy access to credit. He warns that this economic model is unsustainable and is leaving many people behind.

While gold has performed well in recent years, Rule believes it has further room to rise. He noted that gold's share of the U.S. market is well below historical averages, indicating the potential for significant demand growth.

Rule pointed out that gold as an investment and savings mechanism is ignored by 99.5% of the people in the U.S. market. "Gold doesn't need to beat the dollar, it doesn't need to beat U.S. bonds, it just needs to revert to the mean. Then the share of gold in the U.S. market will increase fourfold. Can you imagine what a four-fold increase in demand for gold and gold mining stocks in the U.S. market would do to the price of gold? I don't hold gold because the price of gold may go from $2,600 to $3,000, but because I'm worried that it will go to $10,000."

Based on this outlook, Rule has increased his investments in energy, particularly in Canadian oil and gas producers, arguing that the industry could benefit from deregulation under the new government, which is expected to boost production and exports of liquefied natural gas.

Rule sees a bull run for copper next year, too, driven by supply constraints and growing demand, especially in developing countries. “Unless a global recession dampens demand, the impending supply shortfalls and rising demand could push copper prices substantially higher over the next few years,” Rule said.

Article forwarded from: Jinshi Data