It happened two weeks ago, but I still want to comment on it belatedly. As you’ll recall, Bernanke testified before Congress and the topic of gold came up. The gist was that he doesn’t, nor does anyone else really, understand the gold price. Fine. But, within that larger point, he also said something else which I think is worth quoting directly:
“I suppose that one reason gold prices are lower is that people are less concerned about extreme outcomes, particularly negative outcomes and therefore they feel less need for whatever protection gold affords...Gold price going down is not necessarily a bad thing from that perspective. It suggests people have somewhat more confidence, and are less concerned about really bad outcomes.”
Now, generally, I am not one who falls into the conspiratorial camp when it comes to precious metals. But, since the April takedown, there have too many anecdotes and data points that have to leave you scratching your head. And commentary like that from the Fed Chairman only feeds the beast in my opinion. It’s fine to be confused by gold (even though the U.S. is largest sovereign holder of the barbarous relic as a reserve asset, and Mr. Bernanke knows that), but then to impute some logic from a lower price at the same time, and to suggest a preference for that outcome, strikes me as something of a reveal. This whole “recovery” concept is about smoke and mirrors and convincing people to maintain confidence in the system and political leaders. But the jobs numbers are weak, the GDP numbers are weak, trillions of monetary units have been created without a satisfactory result – but, gold is down, so no need to worry.
Maybe holding the price down does serve a political end. Just a thought.
