Price of gold and global currency wars

Gold bars are displayed at a shop in Tokyo.


JEREMY HOBSON: Let's turn now to Juli Niemann, an analyst with Smith Moore and Company. She joins us now live from St. Louis. Good morning.

JULI NIEMANN: Good morning Jeremy.

HOBSON: So, what's the deal? Why is everybody buying gold?

NIEMANN: Well, there's no demand for gold. Industry isn't buying it because it's so expensive. Jewelry, nobody's buying jewelry because it's so expensive. What gold is now, it's become an alternative money. Nations can't manipulate it like they can their currencies. And nations are trying to cheapen or devalue their own currencies so consumers can afford to buy more of what they make and export. That's great for the exporting countries, but it puts all of your trading partners at a huge disadvantage. They retaliate by cheapening their currencies and you get into this global conga line going to the bottom with trade retaliation, trade wars, potential inflation. Nobody wins.

HOBSON: So it's this global currency we've been talking about and I assume that the Fed's action last week to buy an additional $600 billion worth of treasury bonds played some role here. Is this the affect that Ben Bernanke wanted when he did that to stimulate the economy?

NIEMANN: He's got a tough position because his first mission is to take care of the U.S. He wants to get our economy out of the swamp by floating it up on this big sea of dollars -- very low interest rates, easy money. And that basically is dumping all this money into the financial markets. That does make the value of the dollar go down, makes our exports more attractive, and more attractive for our global trading partners. The problem is all the repercussions I just mentioned. You get into this tailspin and now you've got a fistfight going on on the school yard because every country wants to have the cheapest currency. So that's the consequence of Bernanke's mission last week. So we have two bad sides of this coin.

HOBSON: Juli Niemann, analyst at Smith Moore and Company, thank you.

NIEMANN: You bet.


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