The relationship between the dollar price of gold and the size of the US monetary base is not as robust as often assumed. Prior to the global financial crisis there was barely any relationship at all. Since then, the price of gold has risen in line with the monetary base, but this does not prove causation: gold would probably have benefited from safe haven demand regardless of the actions of the Fed. Looking forward, further gains still seem likely despite gold’s sluggish performance so far this year.
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