In 1979-82, when most world economies were suffering a recession, Japan did not impose a tight money policy and therefore escaped recession. There has been a strong correlation over the years between monetary policy and the price of gold. When central banks adopt easy-money policies, gold tends to rise. When they impose tight money, gold tends to decline. The Midas metal is an ideal compass for monetary policy.
Gold has certain unique features that make it the most sensitive measure of inflationary fears.
It is not just another commodity. Unlike oil, soybeans, or pork bellies, gold is indestructible and is never consumed. Thus annual production is only a tiny fraction of the world's total stock. Annual production seldom exceeds 2 percent of the outstanding gold supplies. But gold supplies never decline and seldom increase significantly.