Since March 18, 2020, the real U.S. 5-year bond yield based on the TIPS market has declined by 142 basis points from 0.63% down to -0.79%. During this same time period, gold has gained by $283.50 or 19.17% from $1,478.50 per oz up to a settlement price yesterday of $1,762.10 per oz.
Back on August 22, 2011, when gold reached its all-time nominal high settlement price of $1,888.70 per oz, the real U.S. 5-year bond yield based on the TIPS market settled at -0.79%, which is exactly where it settled yesterday! We are currently experiencing a repeat of 2011, but the 2020 gold run has only just begun!
The 2011 gold run occurred over a period of exactly 27 weeks and it coincided with a very similar downward swing in real U.S. 5-year bond yields. On February 14, 2011, the real U.S. 5-year bond yield settled at 0.51% as gold settled at $1,364.60 per oz. Over the following 27 weeks, real U.S. 5-year bond yields declined by 130 basis points to -0.79% as gold gained by $524.10 or 38.4% to $1,888.70 per oz.
If the 2020 gold run occurs over a period of 27 weeks like in 2011 and results in the same percentage gain of 38.4%, it will result in gold reaching $2,046.38 per oz on September 23, 2020.
Although gold's day-to-day movements and short-term swings are closely correlated to the real U.S. 5-year bond yield, gold's long-term gains are closely correlated to growth in the real U.S. money supply... calculated by adding together total U.S. checkable deposits + total U.S. savings deposits + total U.S. currency in circulation + U.S. treasury deposits at Federal Reserve banks. When gold reached its all-time nominal high settlement price of $1,888.70 per oz on August 22, 2011, the real U.S. money supply was only $7.951 trillion. During the 106 months since then, the real U.S. money supply has grown by 127.33% to $18.075 trillion.
NIA has created two exclusive charts of the nominal gold price vs. real money supply adjusted gold price from August 22, 2011 through today. Gold's all-time nominal high settlement price of $1,888.70 per oz from August 22, 2011 would today be equivalent to $4,294 per oz.
In fact, prior to the March 2020 Coronavirus panic, which caused a short-term decline in all asset prices... gold reached a February 24, 2020 short-term peak settlement price of $1,672 per oz. The real U.S. money supply on February 24, 2020 was only $14.272 trillion and has since increased by 26.87% in only four months! Gold's February 24, 2020 settlement price of $1,672 per oz is already equivalent to a real money supply adjusted gold price of $2,122 per oz!
Gold has a lot of catching up to do over the next few months to the real U.S. money supply!