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This One Chart Shows Exactly How Undervalued Gold Is Right Now

As the chart shows, gold has tracked the expansion in US debt pretty handily (editor’s note: the correlation between the two is a strong +0.86).

You can see in 2011, the rise in the gold price became overextended relative to the rise in US debt. Then it decoupled and went in the opposite direction.
This is a similar trend to what occurred in the early 1980s. And if one expects that relationship to resume (we do), then gold looks anomalously cheap relative to the rising level of US debt.

A second rationale for holding gold takes into account the balance sheet expansion of central banks. If one accepts that gold is not merely an industrial commodity but an alternative form of money, then it clearly makes sense to favor a money whose supply is growing at 1.5% per annum over monies whose supply is growing up to 20% per annum.

Source Zero Hedge

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