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. In fact, the Bank of England was still selling gold through the end of 2001. The Swiss National Bank already announced its intentions to sell gold reserves in 2003. Despite all its attributes, many Fed officials still consider this an indicator of inflationary pressures.

Short Term Perspective
Gold prices are stuck in a trading range. To a large extent, rising gold prices reflect global economic and political issues. Some investors are finding gold as a positive alternative to stocks, particularly since interest rates are so low these days. The opportunity cost of holding gold is reduced when interest rates are low and the stock market is faltering. Right now, though, it is useful to keep the long-term perspective in mind. Gold prices are moderate even judging by where prices were less than 10 years ago.

Alternative Inflation Measures   •   Gold Prices   •   Employment Cost Index   •   Civilian Unemployment Rate

Pool of Available Labor   •   Nonfarm Productivity   •   Treasury Yields   •   Stock Prices   •   Fed Monetary Policy Summary