Short Term Perspective Gold prices were sluggish for much of the year and plunged in mid-1999 after central banks announced sales of the gold reserves. In the past six months, gold prices have drifted down from the June highs. Neither stock price nor oil price fluctuations have bothered this indicator, which gains in times of uncertainty.
Long Term Perspective Gold is a special metal. It has long been considered a hedge against inflation even though it has not kept up with inflation for several years. Gold is also considered a hedge in times of uncertainty such as war, economic and financial turmoil. In 1999, several central banks announced their intentions to sell gold reserves. The Bank of England has sponsored several gold auctions in the past two years. Despite all its attributes, many Fed officials still consider this an indicator of inflationary pressures.