How Do Interest Rates Affect Gold Prices?

Interest rates and gold prices have an inverse relationship, meaning that when interest rates rise, gold prices tend to fall, and when interest rates fall, gold prices tend to rise.

When interest rates are high, the opportunity cost of holding gold increases. This is because other investments such as bonds and savings accounts offer a higher return, making them more attractive to investors. As a result, the demand for gold decreases and the price of gold falls.

On the other hand, when interest rates are low, the opportunity cost of holding gold decreases. This is because other investments such as bonds and savings accounts offer a lower return, making them less attractive to investors. As a result, the demand for gold increases, and the price of gold rises.

It's important to note that the relationship between interest rates and gold prices is not always straightforward. Other factors such as currency exchange rates, investor sentiment, and supply and demand also play a role in determining the price of gold.

Also, during times of economic uncertainty and market volatility, investors tend to flock to safe-haven assets such as gold, regardless of interest rates, which can drive up the price of gold.