News and Insights

There’s been a lot of press about gold lately. And a lot of interest in Rush Gold. Find out more including our market insights.

What happens to gold prices when interest rates go up?

What happens to gold prices when interest rates go up?

It’s common wisdom that when interest rates go up, gold prices go down. This seems to make sense, since gold does not pay any interest. Why would someone buy gold, the thinking goes, when instead they could buy a bond that pays them 3, 4, or 5% per year?

There’s just one problem with this common wisdom: it doesn’t seem to be based on the facts.

This table shows the price of gold in the months after banks raised or lowered interest rates:

U.S. Federal Funds rate, gold prices. Sources: St. Louis Federal Reserve Bank, LBMA (https://fred.stlouisfed.org/graph/?g=7g6l)

So when banks raised interest rates, the price of gold was actually higher 12 months later than when they lowered them.

It’s been a long time since we’ve seen interest rates go up to any significant degree: since the start of the GFC we’ve even seen interest rates fall to multi-century lows. But if you look back to the last major periods of rising rates you get some interesting results:

Source: Yahoo Finance https://finance.yahoo.com/news/rising-interest-rates-push-gold-133032211.html

No one is expecting interest rate rises like these anytime soon, but most analysts agree that more rate rises are coming. Based on the historical record, however, rising interest rates may not actually represent the major threat to gold prices they were once thought to be. And we may even continue to see more headlines like this recent one from Bloomberg:

Sometimes it pays to challenge the conventional wisdom.

The next time someone says “but higher rates will make gold go down!”, you can just dazzle them with the facts. While you’re at it, point them to SendGold and you’ll earn a referral reward…it’s the easiest way to add to your own pot of gold.

Related News

Keep calm and stay ahead of the game

Protecting your wealth – the 2022 view It’s hard to know where to turn, with equities in free fall, rollercoaster…

Read More

The impact of Russian sanctions on gold

Gold market update Gold rose to a one-month high on Monday, just shy of the $2,000 per ounce level, as…

Read More

Sanctions Usher In New Era for Gold

The U.S. administration has established a financial Maginot Line across the world economy. It looks like those who own gold…

Read More