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Rising interest rates & the price of gold

What's your opinion on how high the interest rates have to go before we see a significant pullback in gold ?

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  • gsa1fangsa1fan Posts: 5,566 ✭✭✭
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    Avid collector of GSA's.
  • derrybderryb Posts: 36,110 ✭✭✭✭✭
    I believe by the time the Fed gets around to raising interest rates gold will have decoupled completely from the US$. You could very easily see higher interest rates have no effect on gold.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • roadrunnerroadrunner Posts: 28,303 ✭✭✭✭✭
    What do you define as a pullback? 33% like in 2008 or 7% like we just had this past month?

    Interest rates can go to the moon as long as the net real rate remains near 0% or negative. It tookyears of increasing rates in the 1970's culminating near 20% to finally kill gold in the early 1980's. Today, rates have been artificially depressed by hundreds of $TRILLIONs in Interest Rate swaps. It's hard to say what a non-manipulated rate would actually be. Short term increases in rates can push the gold price either way. But as in the 1970's, generally rising rates will lead to gold price increases. The end is in play when real rates turn strongly positive. And to get there, a strong currency or equivalent is needed.

    Rates end to rise because of inflationary expectations in portions of the economy. If there are none, then rates will tend to stay low.

    roadrunner
    Barbarous Relic No More, LSCC -GoldSeek--shadow stats--SafeHaven--321gold


  • << <i>What do you define as a pullback? 33% like in 2008 or 7% like we just had this past month?

    Interest rates can go to the moon as long as the net real rate remains near 0% or negative. It tookyears of increasing rates in the 1970's culminating near 20% to finally kill gold in the early 1980's. Today, rates have been artificially depressed by hundreds of $TRILLIONs in Interest Rate swaps. It's hard to say what a non-manipulated rate would actually be. Short term increases in rates can push the gold price either way. But as in the 1970's, generally rising rates will lead to gold price increases. The end is in play when real rates turn strongly positive. And to get there, a strong currency or equivalent is needed.

    roadrunner >>



    Very interesting perspective rr. I never thought of it like that. So if you feel strongly about this, then is there anything under
    the current economic conditions that could drive down the price of gold, other then the crooks on wall street playing with the market ?
  • secondrepublicsecondrepublic Posts: 2,619 ✭✭✭
    gold will rise with inflationary expectations. high interest rates could be used to crush inflation, and therefore the price of gold.
    "Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
  • cohodkcohodk Posts: 18,549 ✭✭✭✭✭


    << <i>gold will rise with inflationary expectations. high interest rates could be used to crush inflation, and therefore the price of gold. >>



    Interest rates will rise with inflationary expectations. Gold has typically done well during interest rate increases because the FED raised rates to combat inflation. Had there been no inflation, interest rates would be steady as would the price of gold.

    Gold rose from 2001 to 2007/8 because of inflationary pressures. All around the globe factories were running at maximum capacity. Now, those same factories are missing a few cyclinders. Its gonna be awhile before the global growth engine gets a tune-up and inflation comes racing back.
    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • MsMorrisineMsMorrisine Posts: 32,123 ✭✭✭✭✭


    << <i>

    << <i>What do you define as a pullback? 33% like in 2008 or 7% like we just had this past month?

    Interest rates can go to the moon as long as the net real rate remains near 0% or negative. It tookyears of increasing rates in the 1970's culminating near 20% to finally kill gold in the early 1980's. Today, rates have been artificially depressed by hundreds of $TRILLIONs in Interest Rate swaps. It's hard to say what a non-manipulated rate would actually be. Short term increases in rates can push the gold price either way. But as in the 1970's, generally rising rates will lead to gold price increases. The end is in play when real rates turn strongly positive. And to get there, a strong currency or equivalent is needed.

    roadrunner >>



    Very interesting perspective rr. I never thought of it like that. So if you feel strongly about this, then is there anything under
    the current economic conditions that could drive down the price of gold, other then the crooks on wall street playing with the market ? >>




    my take is that the inflation numbers can be manipulated by the gov't to further an end.

    I know it is a tin foil hat conspiracy theory. I brushed it off when it was first suggested yearsa ago. However, I believe it after this past commodity spike with a smaller increase in CPI. I was seeing much higher food and energy prices.

    Anyway...

    what would it take to drive down the price of gold?

    a true global economic recovery.

    As part of the tin foil hat... I'll add that it has to be felt by the average guy and not just appear in the numbers. Although some might say that could be required tin foil hat or not.


    To me, gold is a "cling to" safe haven that took a bit longer than I'd have liked to draw wider appeal (e.g. Europe is only now buying gold heavily?)
    Once a strong recovery starts, people will look to better &/or faster returns in things like stocks and we'll hear the old stories about the long-term return of gold again.



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  • JustacommemanJustacommeman Posts: 22,847 ✭✭✭✭✭
    I agree with cohodk that there is less inflationary pressure today. However, I contend that one can go from deflation to hyper inflation in a blink of an eye. Hyper inflation will be result of a currency collapse. Iceland had a very high standard of living. Their currency collapsed and real prices net doubled. Their citizens have been fleeing the country in abject poverty. Yes, this is a small country. Most countries think it could never happen to them. Iceland thought the same thing a short time ago also. A few misplaced bet ands poof.....I say a lot of misplaced bets will come home to roost yet................MJ
    Walker Proof Digital Album
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