By Frank Holmes US Global Investors
The correlation suggests the current level of liquidity supports a gold price of $1,780 per ounce, well above the current spot price around $1,300.
I am unsure of the validity of this correlation but the thesis seems in the ballpark. Additionally, the time period that analysis used was unstated in the original article. There may be some work in my future.
Gold has been in extremely oversold territory lately despite drivers for the metal remaining in place.
Here’s a different way to look at how far gold has been off course.
The chart below tracks the correlation of the price of an ounce of gold
to global liquidity, with global liquidity defined as the sum of the
U.S. monetary base and the foreign holdings of U.S. Treasuries. Since
June 2000, as the U.S.’s monetary base and foreign holdings increased,
so did the price of gold.The correlation suggests the current level of liquidity supports a gold price of $1,780 per ounce, well above the current spot price around $1,300.
I am unsure of the validity of this correlation but the thesis seems in the ballpark. Additionally, the time period that analysis used was unstated in the original article. There may be some work in my future.
