Do interest rates affect gold prices

HalfDime

do interest rates affect gold prices

Interest rates do affect gold prices, primarily through an inverse relationship—meaning gold prices typically rise when interest rates fall, and decline when rates rise—although the connection is nuanced and shaped by other economic dynamics as well.

When interest rates decrease, traditional interest-bearing assets like bonds yield less, reducing their attractiveness and making gold more appealing as a store of value.

Conversely, rising interest rates make stocks and bonds more attractive relative to gold, because gold does not generate income, so the opportunity cost of holding gold increases, often pressuring gold prices downward.

The effect is strongest with real interest rates (nominal rates minus inflation), not just nominal interest rates. Negative real rates (when inflation exceeds nominal rates) are particularly supportive of gold prices because traditional assets provide a loss in purchasing power.

The relationship is not guaranteed or perfectly stable; periods have occurred where gold and interest rates rose together due to a mix of geopolitical, economic, and monetary policy factors.

Global events, inflation expectations, currency fluctuations (especially the U.S. dollar), and central bank policies also play significant roles in shaping gold’s trajectory.
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We should be getting the first a few interest rate cuts starting in a couple of weeks on Sept. 17th, so let's see if gold follows higher.