Global Money Supply And Currency Debasement Driving Gold Higher
Gold is marginally lower in all currencies today and appears to be
steadying near four-week highs on further evidence of strong consumer
demand in Asia. Market concerns about contagion in the eurozone should
prevent significant price falls from these levels.
Jewellers and bullion dealers in India and China continue to stock up
prior to their various festivals – such as Diwali in India and Chinese
New Year in January 2012.
One of the primary drivers of higher gold prices in recent years has
been money supply growth in the US and globally and consequent concerns
about currency debasement.
Since 1998, increases in the price of gold have been correlated with
increases in global M2. If central banks in both the developed and
developing world continue to adhere to highly accommodative monetary
policies, global M2 should subsequently rise and support a further
increase in gold prices, as it has in the past.