2016 Salt Conference: Austan Goolsbee and Chuck Yates Discuss the Gold Standard

May 11 2016 | 2:46pm ET

Serengeti partner Leslie Biddle, University of Chicago professor Austan Goolsbee, and Chuck Yates of Kayne Anderson Capital discussed gold prices and oil prices on Wednesday at the 2016 Salt Conference.

During a conversation with World Gold Council Director Greg Collett, the three panelists provided their projection for gold prices by the end of the year.

Yates was bullish, stating that prices could rise as high as $1,825 by the end of the year.

Goolsbee said that from an economist’s approach, he was willing to stick with the status quo. “If prices today are around $1,275…  I’ll say $1,275.”

Biddle foresaw some flight to safety, but didn’t offer a price prediction. She projected a slight boost to gold prices by the end of the year.

Yates and Goolsbee chatted about chatter regarding a return to the gold standard.

“I’m not saying that the gold standard is a panacea, but there is something said about the government determining the value of your money,” said Yates.

“The gold standard is not a panacea. It fact it’s horrible. It’s killing you,” said Goolsbee. “We gave it up because it didn’t work at all. I’m sympathetic on the issue of debt, and academic work shows that as nations increase debt how it impacts growth. The gold standard doesn’t solve that. You would much rather have Janet Yellen determining the price of the dollar than gold miners in Russia or Africa. If you were the Russians, and you wanted to start inflation, you would hoard gold and then release it on the market or mine for as much as possible  This opens up the U.S. government to a form of economic terrorism that we don’t want to face. ”

Oil Prices in Flux

Oil prices were also in focus, particularly the recent slump in prices and the expectations for a recovery.

“Nothing solves low oil prices like low oil prices,” said Yates. “Nothing solves high oil prices like high oil prices.” Yates argued that we are “closer to balance” than we appreciate and said that he is in the camp that we will be undersupplied in the second half of 2016.

Goolsbee encouraged investors to think more about the demand side of the equation when considering oil prices.

“Up or down, oil prices matter less to the U.S. economy,” Goolsbee said. “If oil prices have been more about demand. If oil prices are lower because of poor aggregate demand, it’s not longer great for the American economy.”

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