How Fear and Uncertainty Drives Demand for Gold

by Darren Brady Nelson

Even those in the nonfinancial media have noticed the skyrocketing price of gold this year. Some partially identify, but don’t quite understand, some of the many (and more measurable) intermediary effects in the chain of causation such as a “weakened US dollar” and “low bond yields.” Those in the financial press add to these factors ones like “central bank reserves” management, along with mining production and “jewelry and industrial demand.” One mainstream headline surprisingly hit closest to the mark regarding the few (and less measurable) underlying causes: “Fear and Cheap Money Send Gold Price Soaring.”

But the chief cause for this and all major rises in gold prices is not “fear and” but fear of cheap money.

In a 2013 interview titled “What Is Key for the Price Formation of Gold?,” Robert Blumen makes the following seven key points, not only for then, but for today and the foreseeable (fiat money) future:

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