Fed Faith Erodes as Gold Price Climbs on Inflation Concerns

Former St. Louis Fed President Jim Bullard believes that gold prices are rising due to eroding faith in the Federal Reserve (Fed). In an interview with Kitco News, Bullard stated that the gold market has already 'voted' on the issue of inflation and interest rates.

Bullard's comments come after Kevin Warsh, a member of the Fed's board of governors, recently spoke at Jackson Hole and suggested that the central bank bears responsibility for 65 months of elevated inflation. Bullard noted that Warsh's statement has increased the market probability of a rate hike if inflation does not come down faster than expected.

Bullard also expressed concerns about the fiscal situation in the US, pointing out that deficits are at 6% and debt is heading towards 120-150% of GDP. He stated that there appears to be no concern among politicians to curb these deficits, which has led to a loss of faith in the Fed.

Bullard believes that foreign central banks have been diversifying away from Treasuries and into physical gold, and sees this as a signal of eroding faith in the Fed. He also suggested that the official US gold account is outdated and should be marked to market.