A recent World Gold Council lunch to discuss gold’s role as a hedge against the dollar raised as many questions as it answered. That gold provides a hedge doesn’t seem in doubt but on what basis is less clear. Politics, economics, market fluctuations, supply factors – no doubt all have their role, but finding the exact causal links is still far from understood.
All this may change, however, thanks to the rise of the euro and the decline in power of European national central banks. While the trend is for these central banks to sell down their gold reserves (the renewal of the Gold Agreement by the European Central Bank last month ensures a planned and orderly disposal), what they keep may gain in importance.
