Gold vs. M2 Supply
Gold price and M2 money supply · Quotes delayed up to 5 minutesThe price of gold plotted against M2 — the broadest commonly-tracked measure of U.S. money supply, including checking accounts, savings accounts, money market funds, and small-denomination time deposits. The chart visualizes the simplest version of the monetary debasement thesis: as the supply of dollars expands, the dollar’s purchasing power declines, and gold (as the historical alternative store of monetary value) tends to rise. This is the chart most often used to make the long-term case for gold ownership.
Analyst's Note
The relationship between gold and M2 has been remarkably durable across the post-1971 period, but with significant lag and noise. M2 expansion produces gold price response over multi-year horizons, not in lockstep — which is why short-term traders dismiss the relationship and long-term holders rely on it. The post-2008 period accelerated M2 expansion meaningfully, and the post-2020 period accelerated it again; gold’s response has unfolded over the years that followed each expansion. For the analytical investor, the relevant question is whether gold has fully discounted current M2 levels (in which case mean reversion to the M2 trend is the more likely path) or whether the lagged response is still in progress (in which case the upside remains material). Both readings have credible adherents and the chart visualizes the ambiguity directly.
The price of gold plotted against M2 — the broadest commonly-tracked measure of U.S. money supply, including checking accounts, savings accounts, money market funds, and small-denomination time deposits. The chart visualizes the simplest version of the monetary debasement thesis: as the supply of dollars expands, the dollar’s purchasing power declines, and gold (as the historical alternative store of monetary value) tends to rise. This is the chart most often used to make the long-term case for gold ownership.
Analyst's Note
The relationship between gold and M2 has been remarkably durable across the post-1971 period, but with significant lag and noise. M2 expansion produces gold price response over multi-year horizons, not in lockstep — which is why short-term traders dismiss the relationship and long-term holders rely on it. The post-2008 period accelerated M2 expansion meaningfully, and the post-2020 period accelerated it again; gold’s response has unfolded over the years that followed each expansion. For the analytical investor, the relevant question is whether gold has fully discounted current M2 levels (in which case mean reversion to the M2 trend is the more likely path) or whether the lagged response is still in progress (in which case the upside remains material). Both readings have credible adherents and the chart visualizes the ambiguity directly.
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