The price of gold has risen above $4,000 per ounce for the first time as investors continue to seek a safe place to put their money at a time of global political and economic uncertainty. This has led some to speculate that gold may by threatening the supremacy of dollar-denominated assets like Treasury Bonds.
Ryan Chahrour is a professor of economics and international studies at Cornell University. He says the dollar will remain the currency of choice in international trade and finance.
Chahrour says: “It would be virtually impossible for gold to take on the multifaceted role of the USD in international trade and finance. This probably is a little bit about hedging inflation risk, but if it were primarily about this, I think we should see even larger and broader commodity price changes. So again, I don’t think this is the main thing going on.
“This leaves us with central bank reserve demand: Since the supply of gold is fixed in the short term, small changes in demand could lead to large price swings. But these might be temporary.
“I think the big question is how this is connected, if at all, to record equity prices at the same time. It’s hard to see how investors would be so scared in one dimension and so risk-seeking in another.”
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