As you can see above, gold had a rare magnitude move in mid-April of 2020, in late July of 2020 and in March of 2022.
What was going on? Inflationary policy.
These 2020 dates were pandemic-response related.
Specifically, these spikes in gold aligned with the fiscal response — more specifically, government putting cash in the hands of citizens (checks, unemployment subsidies and the "Paycheck Protection Program). In July 2020, the unemployment subsidy was due to expire, and was re-upped.
The gold spike in March of 2022? Inflationary policy.
Russia had invaded Ukraine. Inflation was already nearing double-digits, thanks in part to supply chain disruption, but mostly to the multi-trillion dollar fiscal response to the pandemic. Adding fuel to the inflation fire, while the clean energy agenda was already curtailing energy supply, Congress' responded to Russia/Ukraine with threats to place sanctions on Russian energy exports.
The next spike was March-April of last year. The culprit? Inflationary policy.
It was the $7.3 trillion Biden budget — an egregious 6% deficit spending plan in an economy that was growing at a 3% annual rate.
So, what's happening now with gold prices?
As we know, gold tends to be the global safe haven asset, where global capital flows in times of heightened geopolitical risk. And gold is the historically favored inflation hedge.
That said, geopolitical risk and uncertainty have become a constant. There is plenty to worry about. Add to this, there are market mechanics issues going on in the gold market — a well-documented large migration of physical gold out of vaults in London and into New York, which is creating delivery delays, and strains on inventory.
But the history of this chart above tells us these extreme moves in gold tend to be better aligned with episodes of overt fiscal profligacy (inflationary policy/devaluation of the money in your pocket).
So, what inflationary policies could this recent sharp rise in gold, toward $3,000, be related to?
Remember, in the summer of 2023, the Republican-led House agreed to suspend the debt ceiling through 2025. It gave the Treasury a license to issue unlimited debt for the next two years, which Janet Yellen did, liberally.
That "suspension" of the debt ceiling expired January 1 of this year, just as this recent spike in gold started.