UNCERTAINTY is supposed to lift the gold price. But neither upheaval in the Middle East, nor the travails of the euro zone, nor startlingly loose monetary policy in the rich world is brightening the spirits of those who swear by bullion. After a big rally during the financial crisis, the price has sagged to about $1,200 an ounce, a third below its peak in 2011. Little seems likely to turn it round. “We’ve seen everything gold bugs could hope for: endless money printing, 0% interest rates (both short-term and long-term adjusted for inflation), rising debt and debt ratios in the public and private sectors…So where’s the damn hyperinflation?” asks Harry Dent, a newsletter publisher, in a recent blog post.
The biggest pressure on the gold price comes from the expectation that interest rates in America will rise later this year. Matthew Turner of Macquarie, a bank, says that low interest rates cut the opportunity cost of owning gold. Higher interest rates, by contrast, raise the cost of holding non-interest-bearing assets. Mr Turner thinks expectations of rising rates are already built into...
from The Economist: Finance and economics http://ift.tt/1zgzYxi
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