Bank of Canada Governor Mark Carney said plunging gold prices this week aren’t necessarily a clear signal about the prospects for the global economy, saying base metals tend to be a better guide.
“You had a curious situation this week where there was an adjustment at a time when there was some surprise in economic data, so I would say that that’s more reflecting the specific market dynamics within that market,” Carney said at a press conference today in Ottawa.
Gold futures in New York had a 9.3 percent drop April 15, the biggest decline for a most-active contract since March 17, 1980. Bullion lost ground as the U.S. recovery gained momentum, the dollar rose and Federal Reserve policy makers signaled they may scale back on stimulus, curbing demand for gold as a haven.
Carney, who takes over the Bank of England on July 1, said he doesn’t track gold prices much in his current job. While central banks have lost $560 billion from the value of their reserves as gold prices drop, the precious metal accounts for just $144 million of Canada’s $71.1 billion reserves.
For global growth prospects, “one would point to some of the base metals,” as better indicators than gold, he said, without identifying specific products. For Canada, he identified heavy crude oil, natural gas and lumber, products that are among the country’s most valuable exports.