2
Gold speculation on the decline
A 1kg gold bar is displayed at a Tokyo jewelry shop. After years of high prices, people are less interested in buying gold today.
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
Stacey Vanek Smith: Ever since the housing crash, investors have been pouring money into gold in the last five years, the price has more than doubled. But now investors are starting to shy away. Gold prices have dropped roughly 10 percent in the last month.
Stephen Beard joins us now from London. Good morning Stephen.
Stephen Beard: Hello Stacey.
Smith: So Stephen, bad news if you've got gold bricks hidden under your bed -- but this is actually a good sign for the rest of us, right?
Beard: Yes, it could suggest a return of confidence in the U.S. economy -- even in Europe. After all, the big jump in the price of gold was due to a big loss of confidence in paper currencies, with the U.S. and Europe cutting their interest rates to the bone, and the U.S. printing more money. All that made investors feel that they couldn't trust dollars and euros, so they bought gold. Now if they're dumping gold, that might suggest confidence in paper currencies -- and the economies that underpin them -- is returning.
Smith: So is this the end of our economic troubles? The recovery is on?
Beard: No. I mean, some analysts say the gold market is somewhat jumping the gun. They say the U.S. recovery is still fragile; the eurozone crisis certainly isn't over.
Steve Barrow of Standard Bank says a key indicator of economic confidence is the level of interest rates. So he says, it's hardly a sign of confidence while they remain at rock-bottom levels.
Steve Barrow: I think as long as the Federal Reserve and many other central banks around the world keep interest rates close to zero, gold will hold its value and will actually bounce back once again.
And the Fed says it may not raise interest rates until 2014.
Smith: Our own Stephen Beard in London. Thank you, Stephen.
Beard: My pleasure.
And gold is up more than 10% today. All you can say about that is that it's volatile when you're betting how long it will take the Federal Reserve to destroy our world reserve currency status. Eventually every major fiat currency has eventually beeen destroyed by the government that prints it. In the short run the US benefits be being able to print paper and trade it for useful goods, but that benefit comes at the expense of ones providing said goods. Eventually when people stop taking the money in exchange for things of value, the gig will be up, and the resulting conditions will be very unpleasant for us here.
Actually the Fed says it will not raise rates until the END of 2014, and since the rate they control is the overnight rate, not 5, 10 or more years, rates can and recently have risen for those important maturities. It is the 10 year rate that sets the 30 year mortgage rate, and it has risen dramatically in the past two weeks. And gold under the bed is nonsense. The Chinese, the Mexicans, and most other countries buy it by the ton, and if they start to distrust the future value of the dollar, join Auntie Em in the storm shelter! Wait, wait....that started almost 6 months ago. Goodbye Kansas.
