August 24, 2020 — The price of gold reached an all-time record high of $2,000 per ounce this month. Mainstream economic thinking has treated gold as a side-show since the world went off the gold standard. Nevertheless, the recent spiking in the price signals some important trends. It is not merely “sound and fury signifying nothing,” as sometimes seems true of financial markets.
There are three ready explanations for the historic increase in the price of gold: (i) monetary policy, (ii) risk, and (iii) a spreading desire for an alternative to the dollar as a safe haven. Each of these explanations contains some truth.