The following plot shows the price of gold in both nominal and inflation adjusted (2016) dollars vs. the consumer price index (CPI) since 1960. Similar to the Fed Fund Rate vs. gold price comparison in a previous post, the correlation is not strong. Similar to what I did for the Fed Funds Rate, I have computed Kendall and Spearman correlations between the CPI and nominal price of gold. The results for the Kendall correlation between CPI and nominal gold price is 0.07. The Spearman correlation is 0.04. The possible range for each is -1 to 1. These computed values near zero mean weak to no correlation. However, if you look at the data over the time period about 1975-1985, and then again over the time period around 2005-2015, you see quite different behavior. In particular, one can see a clear correlation in the late 1970’s and early 80’s. Beyond about 2000 the price of gold and the CPI appear to be uncorrelated. One might take from this that in times of high inflation, gold and the CPI show a strong correlation, which is absent in times of low inflation.
GOLD PRICE VS. CONSUMER PRICE INDEX (CPI)