No other asset seems to stir as much controversy as gold. This is in part because of its history, dating back at least through ancient Egypt (around the fourth millennium BC) and King Midas (roughly 750 BC), but also due to its malleability, its luster, and the fact that it doesn't tarnish; its limited supply (which is estimated globally at almost 3.5 Olympic-sized swimming pools, 60% of which has been mined since 1950); and perhaps most importantly, its enduring ability to act as a currency, store of value, and/or inflation hedge against political and economic mismanagement and uncertainty. It is also a market that is incredibly—and surprisingly, given all of the above—opaque.
With the recent price action in gold over the last week, we have received a number of questions with regard to what might be happening; hence, in this Economics Weekly, we discuss gold and what might be the reasons behind its recent price surge.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.