Gold Price Hits New High Near $2,700 as US M2 Money Supply Surges

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As an analyst with over two decades of experience in the financial market, I’ve witnessed countless trends and cycles, but this year has been particularly intriguing. The relentless surge of gold prices to new highs, coupled with record-breaking performances by the S&P 500 and cryptocurrencies, is a sight to behold.

Gold’s price has climbed to an unprecedented peak exceeding $2,660 per ounce, following a significant surge of over 30% in 2021. This makes it the most impressive year-to-date increase for gold this century. Interestingly, this rise coincides with the U.S. M2 money supply also hitting an all-time high.

According to an initial report from Zerohedge on their social media site (previously known as Twitter), the price of gold has experienced a dramatic increase due to its consistent, record-breaking performances this year, reaching unprecedented highs.

Gold continues to break records unyieldingly; it has established a new record high for the fourth consecutive day, marking a 30% increase in value so far this year, reaching $2662. This is the strongest year-to-date performance for gold this century!

— zerohedge (@zerohedge) September 24, 2024

The performance mirrors that of the S&P 500 benchmark index, which recently hit an all-time high of 5,735 as reported by CoinDesk. This coincides with market rallies that seem to be connected to accommodative monetary policies from central banks, resulting in a significant increase in the M2 money supply.

According to a recent report by CoinDesk, the total assets held by the world’s 15 largest central banks reached an impressive $31 trillion by September 25th. This amount is similar to what it was back in April and has been steadily increasing over several months.

Since February, the M2 money supply, encompassing cash in circulation, savings accounts, time deposits, and money market investments, has experienced steady growth each month, currently totalling approximately $21.2 trillion as reported by Trading Economics.

The combined action of China loosening its monetary policy substantially and the U.S. Federal Reserve reducing interest rates by half a percentage point has boosted market activity. Interestingly, as indicated in a report from CoinDesk, the growth of the M2 money supply has shown a robust relationship with the S&P 500’s performance in past data.

It’s worth mentioning that the value of cryptocurrencies increased significantly following the Federal Reserve’s substantial interest rate reduction, causing the relationship between cryptocurrencies and U.S. stocks to reach a correlation of 67%, only slightly lower than the peak recorded in Q2 2022.

The connection between cryptocurrencies and U.S. stocks currently stands at a record-high 67%, which is only surpassed by the 72% correlation witnessed in Q2 2022, as reported by Bloomberg. This close relationship comes after two successive weeks of inflows into crypto assets amounting to $321 million, suggesting a growing appetite for risk.

— The Kobeissi Letter (@KobeissiLetter) September 25, 2024

As a crypto investor, I’ve noticed an intriguing development: The correlation between cryptocurrencies and other assets appears to be strengthening, as per The Kobeissi Letter. This growth comes on the heels of approximately $321 million inflows into cryptos, spurred by increasing risk appetite.

Significantly, Societe Generale has moved all its commodity investments into gold, primarily due to escalating geopolitical concerns and a downturn in the general commodity market.

The French bank increased its gold holdings to 7% of its total asset allocation, reflecting a 40% quarter-over-quarter rise. This pivot toward gold signals growing confidence in the yellow metal as a safe-haven asset amid ongoing uncertainties in global markets.

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2024-09-26 08:08