Ben Bernanke admitted he is baffled by gold prices in July 18 testimony before the Senate Finance Committee.
“Nobody really understands gold prices, and I don’t pretend to understand them either,” the Federal Reserve chairman told lawmakers, according to a Reuters transcript.
He said the metal’s current dip could be seen as a positive thing.
“The perception is that by holding gold you have a hard asset that will protect you in case of some kind of major problem,” he said, in response to a question on the subject. “I suppose that one reason gold prices are lower is that people are less concerned about extreme outcomes, particularly negative outcomes.”
The “gold price going down is not necessarily a bad thing from that perspective,” he added. “It suggests people have somewhat more confidence.”
He also called gold an “unusual asset.”
“It’s an asset that people hold as disaster insurance,” he said. “A lot of people hold gold as an inflation hedge. But movements of gold prices don’t predict inflation very well, actually.”
At press time, gold was trading at $1,296 an ounce. Its price has dropped more than 20 percent this year.