Gold climbs to $700 an ounce; the price of gold adjusted for M3
Shortly after 12 EST time today Gold pushed above $700 an ounce. This is the first time since 1980 that gold has hit this price point.
As you may know, relative to inflation gold is still historically low. I do not think this is a blank check to gold investment safety, but it is an interesting fact to take into consideration. Here are some numbers you might not be aware of — Gold adjusted for M3 money supply.
About a month ago I created a chart pegging the price of gold on the supply of US dollars. The formula used was the price of gold divided by M3 times 100. The numbers are very revealing.
May 10th, 2006 at 2:33 am
Hi ,
Since gold has not “risen” much comparing to M3, do you think it still has some way to go ?
All the excess dollars will find it easy to go to Gold rather than stocks / bonds / foreign equity isnt it ?
May 10th, 2006 at 10:05 am
I think that the recent dramatic spike in gold this year has made gold very high risk in the short term.
I am very much interested in the large scale money flows of mutual funds and foreign governments. Right now I just don’t have all of the data I would like to have.
May 11th, 2006 at 2:07 pm
After some thought I think the conclusion I would reach over this thought is that gold is not in a bubble. Short term there may be some disconnection between supply and demand. Take a look at the late 70s and 80s. There is a very visible and dramatic upswing in the price, where as today the growth is considerably more stable relative to M3.