Cointegration Analysis of US M2 and Gold Price Over the Last Half Century

In this article I have analysed the long-term relationship between US M2 money supply and the price of gold per troy ounce using Engle-Granger cointegration. The analysis shows the existence of long-term price dependency of gold in relation to US M2 money supply. M2 was used in two variants, seasonally adjusted and not seasonally adjusted. No relevant difference was observed between them. A period spanning 53 years, from 1970 to 2023, was analysed. An EC model using monthly observations indicates very weak correlation between the change of M2 and the subsequent change of the gold price, so semiannual observations were used instead which proved fully conclusive. This, together with results from the long-term model, confirms long price cycles and fluctuation around its equilibrium price lasting for years, which allows the use of gold as a hedge against increasing M2. This article may prove beneficial in filling the gap as it confirms gold price to be dependent on US M2 on longer time span analysed than previous studies and is fully able to explain gold price analysing dependency of two variables only.

Authors

Institutions

Publication Details

Journal
European Financial and Accounting Journal
Published
2024-12-23
DOI
https://doi.org/10.18267/j.efaj.283
Citations
1
Primary Topic
Market Dynamics and Volatility
Type
article
Field-Weighted Citation Impact
1.13
Controls
|||
ALL TIME
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
article

Cointegration Analysis of US M2 and Gold Price Over the Last Half Century

Richard Synek
1 citations
European Financial and Accounting Journal
Market Dynamics and Volatility
1.13
article

Cointegration Analysis of US M2 and Gold Price Over the Last Half Century

Richard Synek
article en
1 citations

Abstract

In this article I have analysed the long-term relationship between US M2 money supply and the price of gold per troy ounce using Engle-Granger cointegration. The analysis shows the existence of long-term price dependency of gold in relation to US M2 money supply. M2 was used in two variants, seasonally adjusted and not seasonally adjusted. No relevant difference was observed between them. A period spanning 53 years, from 1970 to 2023, was analysed. An EC model using monthly observations indicates very weak correlation between the change of M2 and the subsequent change of the gold price, so semiannual observations were used instead which proved fully conclusive. This, together with results from the long-term model, confirms long price cycles and fluctuation around its equilibrium price lasting for years, which allows the use of gold as a hedge against increasing M2. This article may prove beneficial in filling the gap as it confirms gold price to be dependent on US M2 on longer time span analysed than previous studies and is fully able to explain gold price analysing dependency of two variables only.

European Financial and Accounting JournalVol. 19(1)
Prague University of Economics and Business (CZ)
Decent work and economic growth
Openalex Percentile: Top 10%
Market Dynamics and Volatility
1.13
AI Navigator

Ask Laika to Summarize, Analyze, and Connect papers live on the map.

Summarize Papers & Methodologies

Extract key findings, datasets, and comparative methods across publications.

Benchmark Rankings & Visual Analytics

Rank top research institutions, authors, funders, topics, and journals by Field-Weighted Citation Impact (FWCI) and paper volume with instant charts.

Connect Distant Disciplines

Bridge topological clusters on the map to find hidden collaborative intersections.