The below chart says a lot. It shows the total U.S. government debt versus the price if gold, both scaled to an index weighting of 100 in December 2007.
It shows that gold and the US government debt show a tendency of, at the very least, co-movement if not outright cause-and-effect. More so, it shows that gold, relative to government debt, goes through periods of over and under valuation. You could make the case, at least using this chart, that gold was overvalued going into the 1,900 per ounce high, but has become has moved towards a more fair valuation. All else equal, a continued rise in government debt would push gold to become more fairly priced.
It shows that gold and the US government debt show a tendency of, at the very least, co-movement if not outright cause-and-effect. More so, it shows that gold, relative to government debt, goes through periods of over and under valuation. You could make the case, at least using this chart, that gold was overvalued going into the 1,900 per ounce high, but has become has moved towards a more fair valuation. All else equal, a continued rise in government debt would push gold to become more fairly priced.
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