Does Gold Go Up When Interest Rates Rise?


Multiple factors are causing the change in the price of precious metals like Gold and silver. Generally, there is a negative relationship between the rise in gold prices and the rise in interest rate. In this article, we will view the type of interest rates causing an increase in gold prices. We will see whether it is a cause-effect relationship or involve micro-macro factors. For this purpose, the article spreads light on four points. For instance:

1: Gold goes up when interest rates rise

Since ancient times, when someone wishes to save something for bad times, he used to purchase precious metals like gold. The practice continues in recent times. During economic downturns, the purchase of gold bullion bars increases to hedge against assets. In this situation, the interest rates often come down due to monetary policies. The low-interest rates offer cheap credit help to recover the economies like America in 2008.

The true value of Gold appears in falling economies as it is independent of economic activity. In such situations, it works like money. When, the value of the property, cash, stock, and other assets see falling trends. Economic strife boosts gold purchase and increases its price. The logical solution to the problem reveals rise in interest rates means a high opportunity cost of holding gold.

Hence, the value of your money increases at this turning point many back to moving away from gold and back to assets. Now, interest rates are high an economic improvement indicator. More interest rates on the savings account, high dividends, and a rise in property value. But high-interest rates mean high risk and an alarm of economic instability and volatility.

2: Real facts about Gold prices when interest rates rise

Economic studies reveal little association between an increase in interest rates and a rise in gold prices. According to analytical studies of economic times gold edges are high as investors await a big Fed rate hike move. An increase in gold prices was observed after finding interest rate hike announcements from FED.

Similarly, HSBC investigates the increase in Gold prices after the FED rates hike. This is the result of an increase in price after a long time by the inducement of factors like the weakening greenback. However, historical events and evidence can be a better source of understanding this mystery.

3: Factors affecting Gold Prices

Economic instability is one of the factors affecting gold prices. It is because of the historical significance of the precious metal as a counter-cycle to the economy. However, neither the economy nor the precious metals are to be evaluated based on interest rates. It requires deep observation to find the connectivity between the two. For instance, interest rate fluctuation along with observing the phenomena of inflation and gold prices.

It is seen that Gold goes up when interest rates show a declining trend. We can recall the situation in 2017 to further understand the process. During this period the prices of gold remain constant but banks were paying negative interest rates. The strange things during the time were market opportunities. Hence, from the historical event, we can learn that either we should invest in stocks or buy gold to secure our financials.  In one case less intention to hedge the precious metals is observed when the government is paying inflationary high-interest rates.

The investor of Gold is not liable to pay interest; therefore, one can get a capital gain in good circumstances. It is observed statistically. The rate hikes can increase the demand for gold and even bearish for the stock. Hence, the demand of Gold will see a peak in the growing economy and fluctuations in price.

4: Gold Go Up; Interest rates rising: a time to buy more

In the period of classic depression, there is seen conventional relation of rise in Gold prices and rise in interest rates. Should we ready for this type of situation? In different situations the interest of buying Gold is observed by different investors to give diversification to their portfolio. Despite, the fluctuations in the prices of Gold and Silver, investors would like to invest in these metals. The most important thing is to have knowledge of everything affecting the Gold price is better before long term investment.

If you are looking to invest in Gold, be sure to check out our Gold bullion page. We carry a wide variety Gold bullion investment products for you to choose from!