This chart shows the price of gold vs broad money supply per capita, normalized to 100 in 1973, on the left axis.
On the right axis, is the inflation-adjusted interest rate of the U.S. 10-year Treasury note.
On the right axis, is the inflation-adjusted interest rate of the U.S. 10-year Treasury note.
Over the past ~50 years, gold's price rose at about the same rate as monetary inflation per capita (which is not the same as price inflation).
It tended to overshoot that trend during periods of low real rates, and undershoot that trend during periods of high real rates.
It tended to overshoot that trend during periods of low real rates, and undershoot that trend during periods of high real rates.
Gold's price in year-over-year terms tends to inversely correlate with the inflation-adjusted 10-year yield.
When real rates are positive, the opportunity cost for owning gold is high. When real rates are low/negative, it makes more sense to have gold exposure.
When real rates are positive, the opportunity cost for owning gold is high. When real rates are low/negative, it makes more sense to have gold exposure.
The gold-to-S&P 500 ratio recently broke above its 50-month moving average in 2019/2020. It previously broke above that trend line in 2001, and fell below it in 2012.
It's one of the simpler long-term momentum comparisons between gold and stocks, and it currently favors gold.
It's one of the simpler long-term momentum comparisons between gold and stocks, and it currently favors gold.
My latest article on gold, published today:
lynalden.com/reasons-to-buy…
lynalden.com/reasons-to-buy…
