The price of gold has reached a historic milestone, surpassing $2,660 per ounce after experiencing a remarkable increase of over 30% this year. This surge marks gold’s best year-to-date performance of the century, driven by various economic factors, including a soaring U.S. M2 money supply.
According to reports from Zerohedge and CoinDesk, gold's relentless rise has coincided with the S&P 500's own record-setting performance, recently hitting 5,735. This dual rally appears to be influenced by loose monetary policies from central banks, which have significantly boosted the M2 money supply.
As of September 25, the combined balance sheets of the top 15 central banks worldwide have topped $31 trillion—an amount last seen in April and indicative of the ongoing monetary easing measures. The M2 money supply, encompassing physical currency, savings and time deposits, and money market funds, has been steadily increasing since February, now reaching $21.2 trillion, as reported by Trading Economics.
Key factors contributing to the upward trend in both gold and the stock market include China’s significant commitment to monetary easing and the U.S. Federal Reserve’s aggressive 50 basis point rate cut. Historical data illustrates a strong correlation between the performance of the S&P 500 and the growth of the M2 money supply, reinforcing the link between expansive monetary policy and market dynamics.
The recent rate cuts from the Federal Reserve have also sparked interest in cryptocurrencies, which have seen a surge in prices following the announcement. Notably, the correlation between cryptocurrencies and U.S. stocks has climbed to 67%, its second-highest level since the second quarter of 2022, according to The Kobeissi Letter. This correlation reflects a growing risk appetite among investors, with $321 million flowing into cryptocurrencies in recent weeks.
Market analysts are optimistic about gold’s future, with UBS predicting that the price could reach $2,700 per ounce by June of next year, driven by a weakening U.S. dollar in the wake of ongoing rate cuts. This sentiment is echoed by Societe Generale, which has made a significant shift in its commodity allocation, moving 100% to gold amid increasing geopolitical risks and a declining broader commodity market.
The French bank has raised its gold holdings to 7% of its total asset allocation, marking a 40% quarter-over-quarter increase. This strategic pivot underscores a growing confidence in gold as a safe-haven asset, especially in light of the ongoing uncertainties in global markets.
As gold continues to break records and the M2 money supply reaches new heights, market dynamics are shifting dramatically. The interplay between monetary policy, stock market performance, and investor sentiment is reshaping the landscape for gold and other assets. Investors are increasingly looking toward gold not only as a hedge against inflation but also as a response to the broader economic challenges ahead. With institutional confidence in gold on the rise, its role as a safe-haven asset seems more pronounced than ever.
September 2024, Cryptoniteuae