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Bernanke Puzzled by Gold Rally
Posted By admin On June 10, 2010 @ 3:56 am In Money Watch | Comments Disabled
Wall St Journal 
June 10, 2010
Federal Reserve Chairman Ben Bernanke says he’s a bit puzzled by surging gold prices. The 30% rally from a year ago, on top of gains in previous years, might be interpreted as a loud signal from markets that big inflation pressures are building in the U.S. Gold is seen by many investors as a hedge against inflation risk.
In this case, it might instead be a risk against risk broadly. Mr. Bernanke notes that the inflation signal isn’t confirmed by movements in other asset classes. Yields on Treasury bonds tend to rise when investors worry about inflation, but those yields have been falling recently. Inflation expectations as measured in Treasury Inflation Protected Securities (TIPS) markets remain low. And other commodity prices are falling. Gold is breaking records, but copper prices are down 17% so far this year.
“I don’t fully understand movements in the gold price,” Mr. Bernanke admitted. But he suggested it might be another example of investors fleeing risky assets and flocking to assets that are perceived as less risky, not only Treasury bonds, but also ones like gold.
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URLs in this post:
 Wall St Journal: http://blogs.wsj.com/economics/2010/06/09/bernanke-puzzled-by-gold-rally/
 Image: http://www.homegain.com/housead/homes_for_sale/index?entryid=11502
 Jim Grant On Gold’s Recent Drop: “Confidence In Bernanke Is Utterly Misplaced”: http://www.prisonplanet.com/jim-grant-on-golds-recent-drop-confidence-in-bernanke-is-utterly-misplaced.html
 QE3 Already Has Gone Wrong: http://www.prisonplanet.com/qe3-already-has-gone-wrong.html
 Gold expected to rally above $1000 in Q1 2009: http://www.prisonplanet.com/gold-expected-to-rally-above-1000-in-q1-2009.html
 Treasuries, Gold Rally as Stocks Retreat on Economy Concern: http://www.prisonplanet.com/treasuries-gold-rally-as-stocks-retreat-on-economy-concern.html
 Marc Faber: “Believing In Bernanke Is Like Believing In Santa Claus”: http://www.prisonplanet.com/marc-faber-believing-in-bernanke-is-like-believing-in-santa-claus.html
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