Gold prices have fallen this year because investors see a reduced need for “disaster insurance,” Federal Reserve Chairman Ben S. Bernanke said.
“One reason gold prices are lower is people are less concerned about extreme outcomes, particularly negative outcomes, and therefore they feel less need for whatever protection gold affords,” he said today under questioning from the Senate Banking Committee. “A lot of people hold gold as an inflation hedge but the movements of gold don’t predict inflation very well actually.”
Gold futures for December delivery rose 0.5 percent to $1,285.40 an ounce at 12:48 p.m. on the Comex in New York. The metal touched $1,301.10 yesterday, the highest since June 21, before erasing gains.
Bullion tumbled 24 percent this year through yesterday as some investors lost faith in the commodity as a store of value amid an equity rally and muted inflation.
“Nobody really understands gold prices and I don’t pretend to really understand them either,” Bernanke told the lawmakers in Washington.