Do Gold Prices Rise Whenever the Debt Ceiling is Raised? → Washingtons Blog
Do Gold Prices Rise Whenever the Debt Ceiling is Raised? - Washingtons Blog

Wednesday, August 3, 2011

Do Gold Prices Rise Whenever the Debt Ceiling is Raised?

Garry White argues:

There is ... an uncanny correlation between the gold price and the US debt ceiling. Over the past 30 years, the gold price has tracked the ceiling whenever it has been raised.

Gold at $2,000? I didn’t used to think so – but now I am not so sure. In fact, I’m almost convinced it will happen before the year is out.
Do you think the chart shows a strong correlation or not?

For an in-depth background on gold prices, see this, this, this and this.


  1. Hard to tell, but I suspect not. It's simple enough to analyze if you have the data and run it through a least squares fit. It would be easier to view if you plot the two against each other, i.e., gold prices on one axis and debt limit on the other. Since there are far fewer debt limit increases compared to gold price fluctuations the statistical error would be large.

  2. Technically speaking when they raise the debt limit, debt increases, more money is available in the economy and eventually some of this money goes to bid up commodities and gold. So makes sense.

  3. The range of the data is highly selective as well. If you extended it backward to 1971 you might have a major disconnect through the 80's and early 90's.

    It is more likely that there are two distinct relationships between gold and debt level. One, during periods of high confidence in paper, during which time there may be no correlation; the second during times of poor or declining confidence in paper, where we see the current strong correlation.


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