Price of gold should not determine US monetary policy | Jeffrey Frankel

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Even if the only objective was low and stable inflation it would be a bad idea

The price of gold reached an all-time high of $2,000 per ounce in early August. And while mainstream economists have treated gold as a sideshow since the world abandoned the gold standard in 1971, this recent price increase is a significant signal.

Three explanations for the elevated gold price – related to US monetary policy, risk and investors’ growing desire for a safe-haven alternative to the dollar – have been offered. Each contains some truth.

Related: Forget doom-laden headlines, the dollar has not gone into terminal decline | Barry Eichengreen

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