The rout in gold prices is telling us that the world is changing GettyThe gold rout probably won’t do you or the economy any harm, observes Irwin Kellner.Lots have been said about the recent decline in gold prices. Most of it deals with the fundamentals of gold itself, such as mine closures, supply and demand, and the like. The rest involves the technical side, such as long-term trends and moving averages. But there are other sides to this story. For example, gold is usually sought when inflation starts to heat up. When the economy first emerged from the Great Recession, gold rose in price, figuring that inflation would eventually rise — not just from the greater demand for metals and other commodities that usually accompanies a stronger economy, but from all the liquidity that the Federal Reserve had to create in order to push the economy forward. It did not work out quite this way. Instead of heating up, inflation actually cooled off. When gold buyers caught on, they dumped the precious metal, sending its price spiraling down. This was followed by indications from the central bank that interest rates would soon rise from current rock-bottom levels. Long rates moved higher, in anticipation of a tightening move by the Fed. This made fixed-income securities more tempting than gold and other commodities that paid no interest. Naturally, gold was dumped, thus putting additional pressure on its price. Higher interest rates made the dollar an attractive investment as well. As a consequence, there was less need for nervous money to seek out gold as a safe haven. The so-called agreement between Greece and its creditors has encouraged the gold bugs to breathe easier, as well. Call it less mistrust of governments and their policies. The pending release of data covering the second quarter of 2015 highlights the bounce-back in economic activity since earlier in the year. This is making other investments, like housing, look better than gold. To be sure, this does not mean smooth sailing for gold prices GCQ5, -0.73% going forward. There will always be unexpected events, both here in the United States and elsewhere, that could provoke a flight into gold and other precious metals — and, just as quickly, a departure. In other words, gold will always be subject to volatility. That said, the current plunge has lasted longer than usual. It has brought gold prices down to levels not seen since the last recession. But not to worry; the rout in gold prices will not cause anything bad to happen to the economy or to you, unless, of course, you are in the business of mining for gold, or have found yourself on the wrong side of a gold trade. marketwatch