The Effects Of Increasing Global Money Supply On Gold

Tyler Durden's picture

From GoldCore

WGC – Linking Global Money Supply to Gold and Future Inflation

WGC stresses that when looking at the effects of variables like money supply and inflation on the gold price, it is important to look at the global economy, and not concentrate only on what is happening in the US. After the start of the financial crisis in 2007, many governments and central banks in the world implemented monetary and fiscal policies to help their economies, but these policies have led to a large increase in the global money supply.

The report shows that when money supply increases both with normal economic growth, and when the supply is increased artificially by central banks, gold prices go up as well. Interestingly, the report finds that there is about a six-month time lag between an increase in the money supply and the price of gold – money supply growth appears to impact future gold performance. Even so, changes in the global money supply only partially explain changes in the gold price.

As far as inflation is concerned, the report suggests that movements in the price of gold can predict changes in the velocity of money, and thus also predict inflation.

The full World Gold Council report is available here.

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Troy Ounce's picture



Just phone Bob.

whatsinaname's picture

anybody have any data on how actual gold consumption demand / supply dynamics plays a role in the price of gold versus the impact of money supply and price fluctuations based on futures trading markets ? Is there anything similar to the oil markets such as the weekly API data that supposedly affects demand/supply for crude oil ? just wondering if there is any organization that tracks similar information for gold..

ParkAveFlasher's picture

16 bbl crude = 1 oz .9999.  Start there.


Tortuga's picture

Data doesn't matter anymore, it's all manipulated. You either believe your eyes ( I use the price of a baby ruth, a coke, and a movie ticket when I was a young'n and a silver dollar vs the prices today to show my children inflation) and a short lesson on 5000 yrs of gold and silver being money and/or only being "owned" by Pharohs and elitists. You either believe pm's are insurance against the financial chaos or not.

Imminent Collapse's picture

Tortuga, you are correct.  Nothing matters except the ability of manipulators to continue their games.  Perhaps the Libor scandal will loosen the grip of the manipulators, but that is not assured.  Bottom line:  buy PMs for their store of value properties, but don't freak out when they go up or down inexplicably.

SWRichmond's picture

The chart shows just how effective the US has been at exporting inflation.

Tinky's picture

"What's all this talk about Gold? Confidence in our system is sky high, as you can easily tell by simply looking at me..."

ParkAveFlasher's picture

junked you for giant picture of Bernanke

Shizzmoney's picture

I think gold is really attached to the EZ Debt Crisis/US Fiscal Cliff.......the more uncertainty there, the higher the price variance.

Banks have manipulated silver/gold long enough...including central banks.  The only way that the price of PMs is elevated above this fixing, is the real threat of fail, either by defaulting on debt or the restructuring of debt (because that lost value goes somewhere; I refuse to believe there is a net loss/loss in any sovereign debt or commodity).

So, by my theory, JPM could lose 50% of its stock price, the price of silver doesn't change (b/c investors will believe governments will prob the bank back up).

But if we have a FinExit/GreExit/US Government Shutdown - the price goes to where it really should be, b/c that centrally planned safety net doesn't that capital has to be protected SOMEWHERE. 

And it's usually in a stick of bullion.

Temporalist's picture

How do you explain 2000-2007 gold price increase?

ParkAveFlasher's picture

16 bbl crude = 1 oz .9999.  [repeat from above]

delacroix's picture

how do you protect capital, that doesn't really exist,beyond the lies, that created it?

Tortuga's picture

With K street, ho politicians, trickle down acting, no child left behind, heriditary high cheek bones, ignobel prizes, doing God's work, liebor, dark pools, ice, big boobs, buying senate seniority in little bity states, depending on the clingers to believe they will go to hell for revenge, ho politicians. Add to the list, please. This sheeple is became a sheepdog for my flock many moons ago. MOON spells secret executive orders.

gmrpeabody's picture

By investing in a gold etf (GLD) that doesn't really exist beyond the... oh wait...,

Western's picture

What about bitcoin. It's a peer-to-peer currency that cuts out the middleman central banksters.

Temporalist's picture

How does one access their bitcoins without electricity?  How does one exchange bitcoins without internet?  How does one "save" in bitcoins?  How does one protect their bitcoins?  How does one value bitcoins?  How does one use bitcoins with someone who has no idea what a bitcoin is?

Western's picture

Why is the internet going out all of a sudden? If we're talking apocalyptic armageddon then really only food, water, and bullets will have any value... yet somehow I sense you hold gold/silver. Too good to follow your own advice?


Plus....... I didnt say bitcoin was a finished product or a complete or a good product, but it certainly removes the central bank middlemen.


The ZH comments section is fraught, FRAUGHT with myopia.

Tortuga's picture

Does it hold it in it's hand, Precious!

ParkAveFlasher's picture

you can chew on watch batteries, but you can't eat a bitcoin

bnbdnb's picture

Anybody taken a look at CORN lately? OMG!

They start direct ctrl-P now, we're looking at $5/can corn in just a few months.

Disenchanted's picture



Haven't you been watching the weather out here in 'corn country?'


It's called drought...


July 1, 2012 Sigel, IL


a lot of corn looks like that or worse around me here in IN...'beans' aren't doin so great either.

youngman's picture

Follow the who eats the corn....its not all sweet corn that humans eat on a Sunday afternoon....its feed corn...feed is the key word there...dogs and guess what those prices are going to do...???? to da moon...

Yardfarmer's picture

and according to recent stats, the average AmeriCIAn is compsed of more than 60% corn. look out below!

Solon the Destroyer's picture

That's a pretty weak ass report. Very light on actual data and charts that could demonstrate the author's thesis.

We know we had inflation every step of the way from the 80s to the crash and yet there was nary a movement in gold.  Any report trying to correlate money supply with the gold price should be trying to explain that particular phenomenom.  Any report with this thesis should also address why gold rose despite the overall collapse of the supply of money + debt.  Debt dwarfs base money and is far more influential on the real economy in a system with debt-based money.

I would be willing to bet that there is an even stronger correlation between the price of gold and bond prices. Gold didn't really take off till the G20 etc. decided to force low lending rates.

I would bet there's also a strong correlation between the price of gold and sovereign deficit spending.

And finally I would bet that the strongest correlation is between the rising price of gold and the falling faith in fiat.

When sentiment believes that aggregate debt cannot be paid back, the bond market will collapse and gold will not be had at any fiat price.

youngman's picture

I disagree the bond market will collapse......the individual investor will sell....but the fed will HAVE to buy it all....and they will...they can not have interest rates go they will buy trillions of them...we as dollar users will not know....but outsiders in other currencies should get the heebie jeebies with all that printing...I think they are starting too now....I would not want to be sitting on a bunch of US dollars or Bonds.....Euros either right fact anything paper...and I think that is what people are starting to realize...that this is faling apart..... fast ......I don´t know...but when it does there will be losses...and who wants to explain to their people they are broke because of the USA or the EU....

24KGOLD FOIL HAT's picture

Heres a keeper thats in Canada: Lake Shore Gold.  Sprott just loaned em $70mil.  I love it when a mining plan comes together!

Bartanist's picture

JMHO, a maximum 40% correlation is still not a correlation.... statistically.

onebir's picture

Would you expect higher, between the money supplies of individual countries, and gold which is internationally traded & priced in US$?

Add up* those correlations & you've 'explained' most gold price movement...

*I think you also need to subtract all the cross-correlations between the independent variables so you don't double count their influences.

Antifaschistische's picture

Yes, when you counterfeit money prices do not rise immediately.  The First Spenders of counterfeit money are able to enjoy both free money and lower prices because the “economy” doesn’t even know the money exists yet.   So, it takes 6 months for counterfeiting to work its insidious way into prices.  The counterfeiter still doesn’t care.   What’s free money, is free money.

SmittyinLA's picture

price of gold can predict inflation? Hmmmm

The Navigator's picture

Just finished watching Lauren Lyster (Capital Account on RT) interview Simon Mikhailovich of Eidesis Capital. Topics covered were LIBOR, debt, derivatives, and GOLD

Great interview, very illuminating, and explained in a way that non-quants can understand. Hopefully that interview will be linked on ZH tomorrow.

Forbes interviewed Mikhailovich last month - here's a little preview of how he feels about gold -

Usually what RT shows on TV today takes 24-48 hours to show up at

Gold and Lauren in 1 shot - can't ask for much more, but sure you will.