The top three factors that have the ability to send gold prices past their all-time highs are as follows:
1. Money supply around the globe increasing at a rapid pace
2. Governments spending without remorse
3. Financial markets becoming way too irrational
In the beginning of 2000, the M1 money supply in the U.K. was 405.65 billion pounds. At the end of 2014, it stood at 1.36 trillion pounds. Simple calculation will tell you that over 14 years, money supply in the U.K. increased over 235%. In other words, there is three times more money circulating in the U.K.’s economy now as there was in 2000. (Source: Federal Reserve Bank of St. Louis, last accessed June 2, 2015.)
Take Australia as another example. In the first quarter of 2000, the country’s M1 money supply stood at AUD$124.60 billion. In the last quarter of 2014, it was AUD$310.80 billion. This represents an increase of close to 150% over 14 years. (Source: Federal Reserve Bank of St. Louis, last accessed June 2, 2015.)
Australia and the U.K. are just a few of the many examples of developed nations where money supply has skyrocketed. In developing countries, these figures are much worse.
For instance, in India, in January of 2006, the M1 money supply stood at 7.48 trillion Indian rupees. In December of 2014, it was 22 trillion rupees. This represents an increase of 194% in a matter of eight years. (Source: Federal Reserve Bank of St. Louis, last accessed June 2, 2015.)
As money supply increases, currency value will be in jeopardy. As a result, demand for gold will increase.