How Investors Can Use Deviation Between Gold and Money Supply
Across the globe, fiat currencies are being printed with wild abandonment as debt-addicted governments try to inflate their economies out of the ongoing crisis. In the United States, the Federal Reserve has tried it all, employing numerous asset-purchasing programs that have yet to spur any sort of meaningful recovery in the “real” economy.
As reflected in the chart above, the M2 money supply — a broad measure predominately comprised of financial assets held by households — has grown steadily in recent years, increasing by 29.3 percent since the beginning of 2009. Given its reputation as the anti-fiat currency, it should come as no surprise that the gold price closely tracked the increase in the money supply over that time frame. In recent months, however, gold has taken a hit amid rumors that the Federal Reserve would taper its asset-purchasing program sooner than planned.