Is the soaring price of gold a sign of monetary instability? Or is it just a transitory "nothingburger"?

Central bankers are now being asked such awkward questions, and they are giving sharply divergent answers. During a Q&A session at a convention of business economists on October 14, Federal Reserve Board Chairman Jerome Powell responded:

EMILY KOLINSKI MORRIS: You used the term gold standard. And you didn't mean it in this context that I'm going to pivot here, because there's a question from the audience that's getting a lot of upvotes. So, one of your predecessors, Alan Greenspan, used to view the price of gold as an indicator of inflation risk. So, in that context, how do you view the rally that we've seen in gold? And if you want to throw in Bitcoin, you can comment on that too.

JEROME POWELL: I'm not going to comment on any particular asset price, including that one. And I think we think of inflation as driven by fundamental supply and demand factors. And it's not something we look at actively.

Powell is saying that the Federal Open Market Committee (FOMC), which tries to fix the quantity of dollars in existence, allegedly doesn't care about the price of gold in particular because it views gold's price as just one price among a vast array of prices that informs their decision-making. According to this view, gold is just another commodity which makes only a small, insignificant contribution to the overall demand for dollars and has no impact on the supply of dollars.

During the October 19 broadcast of CBS's Face the Nation, European Central Bank President Christine Lagarde gave a startlingly different answer:

MARGARET BRENNAN: So you have also said recently that you think investors have begun to question whether the dollar would still warrant its status as the ultimate safe haven currency. I mean, the American dollar is one of the strongest weapons, frankly, that the administration has to use. Do you think that it is the rise of cryptocurrency that is most threatening to that or why are you worried?