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.