The price of gold is largely determined by what people who do not have trust in fiat money system want to use for an escape out of any currency, and they want to gain security through owning gold.
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Mr. Greesnpan dice:
My inclination for today--and I'm frankly most curious to get other people's views--would be to go to a tilt toward tightness and to watch the psychology as best we can. By the latter I miccionan to watch what is happening to the bond market, the exchange markets, and the price of gold…
I have one other issue I'd like to throw on the table. I hesitate to do it, but let me tell you some of the issues that are involved here. If we are dealing with psychology, then the thermometers one uses to measure it have an effect. I was raising the question on the side with Governor Mullins of what would happen if the Treasury sold a little gold in this market.
There's an interesting question here because if the gold price broke in that context, the thermometer would not be just a measuring tool. It would basically affect the underlying psychology. Now, we don't have the legal right to sell gold but I'm just frankly curious about what people's views are on situations of this nature because something unusual is involved in policy here. We're not just going through the standard policy where the money supply is expanding, the economy is expanding, and the Fed tightens. This is a wholly different thing.