QE or Quantitative Easing is a monetary policy that governments and central banks globally use to stimulate the economy. Typically, this policy comes into action when other monetary policies become ineffective.
Under QE, banks start printing and injecting money into the economy by purchasing assets. This method ultimately swells up the bank reserves and lowers the interest rates, which, in turn, increases economic activities. The recession in 2008 witnessed the application of this theory worldwide.
Central banks in major economies like the USA, Japan, and certain European countries started enforcing this system to encourage banks to lend. This economic policy shares a close relationship with the value of gold.
This relationship is inversely proportionate. It means when the injection of the paper currency increases in a system, the price of gold drops. Even though the presence of additional money in the system may seem like the gold price is increasing, the reality is quite the opposite.
When compared with other papers assets like stocks and bonds, the price of gold remains mostly similar or may go down in certain cases.
A concept to know here is Quantitative Easing Tapering. It means when central banks decide to stop printing currency, it creates a vacuum in the system. Therefore, less amount of money is chasing the same amount of gold. Consequently, the price of gold skyrockets owing to the laws of supply and demand.