by Gary Alexander
April 1, 2025
The first quarter is officially over. At press time, I don’t have Monday’s final figures to report, but as of Friday’s close, gold and silver are up 17% and 20%, respectively, year-to-date, while all the stock indexes are down. March divided gold from stocks, with gold up 9%, silver up 11% and stocks down 5% (Dow) to 8% (NASDAQ). The U.S. Dollar Index (DXY) fell 3.3% so far in March, super-charging commodities.
Gold also had the dubious distinction of throwing the U.S. GDP deep into negative territory for the first quarter, due to massive imports. It’s a strange statistical anomaly, having nothing to do with economic production. On March 18 here, I wrote, that the Atlanta Fed’s quick 5-point GDP drop from +2.3% to -2.8% in three business days reflected “a flawed model. It takes human beings to interpret data so they won’t be jerked around by figures that can be easily explained by: (1) exporters dumping their goods before tariffs take effect, plus (2) fires and bad weather.” I was wrong to put blame on the Atlanta Fed.
The Atlanta Fed merely tries to emulate the GDP formula of Bureau of Economic Analysis (BEA), so the blame goes to the BEA. Atlanta Fed economist Pat Higgins wrote, “Much of the widening of the trade deficit in January was due to an increase in non-monetary gold imports from $13.2-billion in December $32.6-billion in January. This accounted for nearly 60-percent of the widening of the goods trade deficit.”
The BEA distinguishes gold from other exports, but Higgins says this distorts the GDP: “Removing gold from imports and exports leads to an increase in both GDPNow’s topline growth forecast and the contribution of net exports to that forecast of about 2-percentage points.” Higgins promised to include a gold-adjusted line from in his model, and he did so on Friday, March 28, as the GDPNow model predicted -2.8% for the quarterly U.S. GDP, while the gold-adjusted GDP was only -0.5%, a 2.3% gap:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
How can the transport of this inert metal, gold, from one port to another cause a 2.3% annualized decline in a $27-trillion economy? GDP means Domestic Production (the DP in GDP), not shifting metal flows.
I’ve read most of the BEA explanation for this – and it still doesn’t make sense to me – but what makes sense is that Americans are demanding more gold in their investment accounts, via exchange traded funds (ETFs) and futures accounts on COMEX, so this his fueled a huge demand for bullion from Britain and Switzerland to back those accounts with physical gold, as required by regulations, hence the import flood.
Gold’s Rise is Mostly Due to Soaring Deficit Since 2001, and Inflation Since 2021
After four budget surpluses (1998-2001), our accumulated national debt was barely $5-trillion in 2001, but it has now reached $36.2-trillion, with an average of over $2-trillion added each year since 2020.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
With our GDP this year expected to be around $27-trillion, and our deficits rising at a pace of $220-billion per month, our accumulated national debt should reach $38-trillion by the end of 2025. That means we will have a debt-to-GDP ratio of 140% (38 divided by 27). Those countries exceeding 150% debt-to-GDP ratio (Venezuela, Japan, Greece and Italy) have not been able to grow their economies much.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
We also have the highest annual budget deficit rate (vs. GDP) of any established, rich (OECD) nation, ranging from 6% to 7% of GDP per year in recent years (right chart, above). It looks like our annual deficit as a percent of GDP will top 7% this year, unless the Trump team works some miracles … fast.
Here’s the math. If we run up $2-trillion in red ink this year, that equals 7.4% of our GDP ($27-trillion). This would virtually tie us with Brazil (7.5%) for the highest rate of any major nation, more than double the euro-zone rate (3.4%) and triple Canada’s rate (2.3%). Some nations in Europe even have budget surpluses, like Denmark, Norway and Switzerland, as do Asian-Tigers Taiwan and Singapore.
Budget deficits show no signs of falling. Both political parties have made a habit of over-spending in the last 24-years. The federal fiscal year of 2025 began October 1, 2024, and although President Trump and Elon Musk’s DOGE team are trying to bring the 2025 budget deficit under $1-trillion, that is a Herculean task, considering the massive level of resistance they are encountering in Washington DC and nationwide.
As a case in point, the federal deficit grew by $308-billion in February 2025, President Trump’s first full month in office. That means the cumulative federal deficit for the first five-months of fiscal year 2025 reached $1.1-trillion (a $2.64-trillion annual rate). Even after adjusting for the timing shift of certain payments, the current-year deficit is 18% larger than the same five months of fiscal year 2024. Spending was $41-billion higher (+11%) this February over last February, and this includes $5-billion less spending in the beleaguered Department of Education, the first major target of the DOGE team of cost cutters.
For the first five-months of the new fiscal year, spending rose by $200-billion (+7%), most of it out of the Trump team’s control, including +$73-billion for cost-of-living increases in Social Security and related Medicare and Medicaid increases, and +$44-billion for interest on the national debt. Most of the rest was from disaster relief and EPA grants. To pay for that new spending, tax receipts grew by only $37-billion.
America desperately needs to get its spending juggernaut under control, despite the violent resistance from the entrenched entitlement community. Gold reflects our inability to do that. Soaring deficits of the financial crises of 2001 to 2011 sent gold up from $260 to $1,500. After a pause, gold began a second rise to $3,000, also on soaring debts, this time with an inflation kicker. In all, gold has soared over three times faster than stocks over the last 25-years, and silver has doubled stock index gains in the last 25-years:
Since 2020, gold has doubled in the last five years from $1,500 to over $3,000, while the Dow is up under 50% and the S&P 500 is up less than 80%. Gold is clearly bursting its suspenders in pride, but you won’t find any coverage of this story on Page 1 of a financial journal or financial news channels. And that’s just fine with me. If the press were all over the gold story, I would be concerned over a bubble about to pop.
Central Banks Have Quietly Resumed a New “Shadow Gold-Standard”
There’s one more story to tell. Before 2022, central banks seldom bought more than 600-tonnes per year (a tonne, or metric ton, is equal to 2,205-pounds or 32,150-Troy ounces) of gold, but in 2022, the world’s central banks started buying over 1,000-tonnes per year, continuing at that same rate in 2025, creating a quiet new “gold-standard,” exchanging their paper currencies in favor of the metal which has triumphed over all paper currencies over time, the metal that gave birth to the original gold-standard that funded the industrial revolutions of Great Britain and the United States in the late 18th through early 20th centuries.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Chart from KITCO News, February 2025
As this chart from KITCO shows, central bank demand in the last three years doubled the blue line of the previous average of just under 500-tonnes per year, reflecting their response to deficits and high inflation in several currencies, with no major paper currency emerging to challenge the ever-weaker U.S. dollar.
We are a stock-oriented letter – and we should maintain the majority of our assets in good stocks – but for portfolio balance, gold is a currency alternative and (for some) also possibly a bond alternative as well.
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
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Follow the Money Flows into Stagflation-Proof Assets
Growth Mail by Gary Alexander
Gold is Quietly Dominating the Financial World…Once Again
Global Mail by Ivan Martchev
Beware of the Auto Tariff Quicksand
Sector Spotlight by Jason Bodner
Did Margin Debt Fuel This March Market Madness?
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About The Author
Gary Alexander
SENIOR EDITOR
Gary Alexander has been Senior Writer at Navellier since 2009. He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks. For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.
Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s. He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division. Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander
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