The 1-year Treasury note is now yielding just 0.49 percent and the increase in year-over-year core consumer-price inflation is up 1.9 percent. Therefore, real interest rates are now negative, which should reduce investors' appetites to hold dollars, as it increases their willingness to buy gold.
Negative real interest rates also cause consumers, businesses and governments to borrow more money. When money is borrowed into existence, the supply of money grows. Increasing the money supply reduces the value of dollars already in existence, especially when those dollars are growing faster than the mine supply of gold, which historically runs about 1 percent to 2 percent per annum.
The year-over-year change in M2 money supply growth is 6 percent. Since total U.S. economic output is around 2 percent, the supply of goods and services is growing far below the rate of money supply growth. This causes aggregate prices to rise and reduces the intrinsic value of the dollar, while boosting the value of gold.
Finally, our government just agreed to suspend the debt ceiling through mid-March 2017. U.S. debt stands at over $18.6 trillion and is larger than our GDP.