Gold Price Rises to Unprecedented Heights

The recent development of the gold price in relation to the M2 money supply in the United States offers a fascinating insight into the dynamics between gold and the state of the economy. M2 represents the total amount of money in circulation, ranging from cash to couches who manage savings. It is important to understand that the value of gold has always been related to the amount of money available. The precision of that relationship may be up for debate, but the connection is undeniable.

This chart shows what a single dollar is worth in terms of gold. This allows us to analyze the relative valuation of gold over time. If we want to match the peak of 1980, we are still 220% away from an increase, which is remarkable if we take into account the current global dynamics. In 1980, the dollar was a dominant role and not a valuable alternative. Today, however, things are different; the US seems to be steering towards a weakening of the dollar.

The new trade rules, rising geopolitical tensions and the shift in the annual financing of the US deficit point to a deliberate break with the dollar-centric system that has governed world trade since 1944. This raises the question of whether we are on the eve of a revaluation of gold. The real answer to this question can only be given in hindsight. However, it is important to understand what a revaluation means: a rising gold price relative to the total money supply. Gold should therefore increase in purchasing power, and we still see a lot of potential in this.

Why should we now shares in gold as a target? In essence, giving a price target for gold is difficult, as it depends on central bank liquidity injections. What is certain is that in a world where trade deficits have to be written off in hard currency again, gold is still far too cheap. Therefore, it is wise to keep a strategic percentage of your total assets in physical gold. This provides stability and security to any portfolio, and the focus should not be on the short term.

I myself do not plan to take profit on physical gold before the game is completely played out. Only after a possible revaluation and at a higher and more stable price I will consider taking other steps.

Frequently Asked Questions

What does this graph show?
The chart shows the gold price in dollars relative to the M2 money supply in the US, allowing us to look at the relative valuation of gold over time.

Why is the relationship between gold and M2 important?
The value of gold is historically linked to the amount of money in circulation. This connection can help us understand how the gold price might develop in the future, especially in a changing economic context.

Why is gold still cheap today?
Gold is relatively cheap because in a world where trade deficits have to be settled with hard currency, the current price of gold has not adjusted to real demand and market liquidity.