Study Suggests Gold and Debt Ceiling Spending Correlate
Finding from 2008 research persists today
Treasury Secretary at the time, Hank Paulson, laid out an order to Moy to seek better forecasting of gold and its demand. As gold demand spiked and the crisis began, it was clear monitoring was necessary.
While focusing through the 2008-2009 period, Boy's staff investigated nearly 200 potential factors that played into the relationship. The stats included the prices of strength of the dollar, and the outcome was rather surprising to even the experts involved.
“My Chief Strategist Mike Stojsavljevich concluded that gold prices correlate most accurately with how close our national debt was to hitting the federal debt ceiling,” Moy said. "I was fully expecting them to come back with interest rates. All of a sudden they go 'debt ceiling.' I go 'What? What are you guys drinking?'"
Since the study's completion, Moy has kept his eye on the relationship between gold and how the debt ceiling being edged toward is relatable.
“For the last four years, there’s been this lockstep of gold prices along with the debt ceiling ... Once the debt ceiling is raised, then that will be another trigger for gold to rise again,” Moy said in an interview.
There has been rough correlations noted between gold and government spending since the 1990s, especially in relation to the debt ceiling, he stated. However, prior to the 2008 study, the deviation was not as strong as other correlations, such as oil and interest rates, according to Moy said.
“Is it a long term trend? We don’t know yet. We’ll see in 10 years. Time will tell whether this correlation is long term or just Fed policy-related,” said Moy.
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