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After a brief contraction in 2022 & 2023, the U.S. M2 money supply is once again surging—rising by $1.2 trillion in just over a year. This renewed expansion is a major force behind gold's bull market.

Over the past year, gold has been on a powerful run—surging from around $2,100 to $3,400, a remarkable 62% gain. That’s especially impressive given that gold is not a speculative stock but a traditionally stable, conservative asset. 

While precious metals investors have plenty to celebrate, many may not fully grasp what’s driving this bull market. Several forces are at play—such as aggressive gold accumulation by emerging-market central banks and the relentless rise in global debt.

Today, I want to spotlight one particularly important catalyst: the renewed surge in U.S. money supply growth, following a rare contraction in 2022 and 2023.

For those unfamiliar, the money supply refers to the total amount of currency units in circulation—whether U.S. dollars, British pounds, or Japanese yen. Tracking the money supply is essential for understanding the effects of monetary policy and assessing inflationary pressures, especially when the supply is expanding rapidly. 

In the U.S., the two most commonly followed measures are M1 and M2. While they differ in composition and absolute value, they generally move in tandem and offer similar insights on a relative basis.

The chart below shows the U.S. M2 money supply—a broad measure that includes cash in circulation, checkable deposits, savings accounts, money market mutual funds, and small-denomination time deposits such as CDs. During the COVID pandemic in 2020 and 2021, M2 surged by roughly $6 trillion as the Federal Reserve unleashed massive stimulus measures to support the economy. However, in 2022 and 2023, the Fed reversed course slightly, leading to a rare and brief contraction in the money supply.

Since late 2023, however, the U.S. M2 money supply has resumed its upward trajectory, expanding by $1.2 trillion in just over a year. This renewed surge is one of the key drivers behind gold’s powerful bull market during that time. It underscores a broader truth: the long-term direction of the money supply is relentlessly upward, with pullbacks being both rare and short-lived.

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The latest surge in the money supply is just a small piece of a much larger trend spanning the past century. From 1920 to 2025, the U.S. M1 money supply—which includes primarily cash in circulation and checkable deposits—has skyrocketed by an astonishing 86,000%. And, sadly, this long-term upward trajectory will not slow or stop anytime soon. 

I’ve chosen to display the M1 chart here because M2 data doesn’t extend as far back, but the long-term path of M2 mirrors that of M1 closely—what matters most is the direction, and it’s unmistakably higher.

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I’m sure you have all heard stories—or actually lived it yourself—but back in the mid-twentieth century, families were able to live comfortable lives on one income while the mother stayed home. They were able to own homes, have large families, save money for their kids’ college, and put away savings for retirement.

Unfortunately, as we all know, life isn’t like that anymore—often not even with two working parents who both have college degrees. What’s the reason?

The reason is inflation, which is the continued growth of the money supply. This has the effect of watering down the currency and reducing its purchasing power. It became much worse after the world’s major currencies were no longer backed by gold starting in 1971. For this reason, it’s important for everyone to understand the significance of the money supply and to monitor it as closely as we do stock averages like the Dow or S&P 500.

As I mentioned earlier, one of the key drivers behind gold’s surge over the past year was the renewed expansion of the U.S. money supply, which began in late 2023 following a brief two-year contraction. Now, I want to show you just how sensitive gold is to money supply growth. The chart below compares gold to the U.S. M2 money supply over the long term, and the correlation is clear: as the money supply rises, so does gold.

This strong relationship is why gold remains one of the most effective ways to preserve your hard-earned wealth against the erosion caused by monetary expansion and inflation, which are two sides of the same coin.

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And lest you think this is just a U.S. issue—it's not. This is a truly global problem. Since 1971, virtually all of the world’s major currencies have been unbacked by gold, meaning there is no constraint on money supply expansion. 

To confirm this, just look at the chart below, which shows global M2 money supply. It has soared by an astonishing $73.74 trillion—an increase of nearly 200%—since 2007.

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Just as gold closely tracks the U.S. M2 money supply, it also moves in step with the global M2 money supply. That’s why gold serves as a valuable hedge against currency debasement—not just in the U.S., but worldwide. 

To learn more about this dynamic, I encourage you to read my recent report titled Gold Isn’t Going Up—Your Money Is Just Losing Value.

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The U.S. money supply contraction in 2022 and 2023 was largely driven by the Federal Reserve’s quantitative tightening (QT) policy during that period. This was an attempt to rein in some of the excesses created by the aggressive quantitative easing (QE) measures implemented in 2020 and 2021 during the pandemic. 

The impact of this shift can be clearly seen in the chart below, which shows the Federal Reserve’s balance sheet—specifically the assets, such as various bonds, that the Fed has purchased and currently holds.

I believe another dramatic expansion in the U.S. money supply is not far off. Quantitative tightening tends to expose the fragility of our heavily indebted, stimulus-dependent economy—often triggering recessions or financial crises. 

Given how deeply this addiction to easy money has taken hold since 2008, it’s only a matter of time before the Fed is forced to cut rates and return to quantitative easing—essentially, digital money printing. When that happens, it will be extremely bullish for gold and silver.

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To summarize, I want to highlight that both the U.S. and global money supply are expanding once again after a rare two-year pause. This is a major—but overlooked—driver of the current precious metals bull market. And I don’t see this trend reversing anytime soon. 

On the contrary, I expect it to accelerate as the next recession forces the Fed and other central banks to fire up the digital printing presses once again. If our money were still backed by gold, we wouldn’t be having this discussion. 

Thankfully, we can still protect our hard-earned wealth from the corrosive effects of inflation by owning gold and silver.

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