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Gold and interest rates

by Alasdair Macleod, Gold Money:

A common misconception in markets about the price of gold is that rising interest rates for a currency will always drive the price of gold down against it. I shall come to market relationships in a moment, but first we must look at the economic relationship between gold and currency.

The primary driver is changes between the relative quantities of gold and currency, with an overlay of changes in confidence for the currency itself. This quantity relationship is simple to understand and needs little elaboration; but it does not mean that a doubling in the quantity of paper money automatically leads to a doubling of the price of gold. The reason is the purchasing power of a currency can and does vary independently from changes in its quantity. Gold, however, is seen by the majority of the world’s population as a better store of value than local currency, so its appeal is global instead of being tied to a single currency’s jurisdiction.

Read More @ GoldMoney.com

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