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Five important charts for gold bugs
Posted on 16 June 2010 with 1 comment from readers
Interest in gold investment is rising with the price of the yellow metal again closing on a new all-time high today. How high will gold ultimately go?
ArabianMoney thinks $5,000 an ounce is possible, largely based on the previous all-time high of 1980 adjusted for something closer to the real rate of inflation since then. But there are more sophisticated approaches.
These charts from contraryinvestor.com tell the story. First, have a look at how credit has grown out of control:
Then consider how the gold price has always dipped in recession periods and surged upwards in a recovery:
What then about gold as a percentage of the money supply:
Or gold relative to household net worth:
Or gold divided by bank loans and leases outstanding:
1 Comment posted by readers:
Great charts… mostly!
But the chart that shows gold as a % of M2 can not be correct for the years 2009 and 2010. Let’s think about this for a moment:
M2 includes M1 PLUS demand deposits, savings deposits, money market funds (M3 = M2 PLUS institutional funds & other “liquid money” stuff).
With over $2 trillion having been printed by the US FED, some of that printed money (maybe 40% of it???) has gone into the banking system, and a subset of this money has gone into Lord knows where.
So how can the graphic be turning up for 2009 and 2010???