Global money supply is at all-time highs, and growing.
That’s not a surprise to anyone familiar with the themes discussed in gold circles. World governments have put themselves into a box canyon, surrounded by high debts, demand for continually higher domestic entitlement spending, without the ability to raise taxes enough to pay for it.
So they print the difference. It’s the only way out of the canyon.
At the same time, gold is in a 10-month correction.
Normally, we see gold and global money supply move together. Excess currency units tend to bleed into gold at the margins, as investors find sovereign debt and other monetary asset classes unable to fulfill their desire for safety/liquidity.
“But US Treasurys are safe!”
Yeah, technically, but tell that to anyone who bought long-dated USTs back in 2021. Those folks are sitting on ~50% losses.
So why the disconnect between gold and money supply?
There’s no one cause – but consider how quickly/high gold ran earlier this year. A protracted correction is a requirement before we can see longer term gold prices move higher.
At the same time, we’ve seen the first cracks in the AI bubble. And despite the relatively small correction, the super-high leveraged “all-in” parts of the market are getting crushed.
Gold weakness has corresponded with the AI bubble. As the bubble continues to deflate, I expect to see gold strengthen.
This disconnect between money supply growth and the price of gold will not last. Eventually, we will see gold’s price snap higher.
You can drive yourself crazy sorting through the tea leaves to pinpoint exact reasons why price action lags or why certain securities seem to soar while others languish over short time frames.
The key is to keep your eye on the long term. There are people who trade intra-day moves. That’s not us.
We’re looking for long-term success by buying value when it’s on sale. This disconnect between gold and money supply is one of the data points to pay attention to in order to orient yourself.
Long term, gold and money supply move together. They’re not right now, and gold is underpriced relative to the move in global money supply.
Act accordingly.
Best,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio
