Gold Price Rate Of Interest

It fully covers the full fiat currency era beginning in 1971 with nixon s closing of the gold window and the prior collapse of the failed gold price rigging london gold pool.

Gold price rate of interest. Gold vs real interest rates chart. Gold has been in a bit of holding pattern since breaking out above 1 700 but the federal reserve has some investors wondering. First the fed slashed its benchmark interest rate policy between 0 and 0 25 earlier this year and it could be stuck in that range for quite a while.

At the time of writing 12 month usd libor shows at 1 949. However it is only partially true. The dollar interest rate that matters today is the wholesale market rate usd libor of a term that matches a gold lease.

Rates are gold s arch enemy given its status as a non interest bearing asset. The following chart below uses more accurate 1980 methodologies to deduce real interest rates. Interest rate interest rate cuts.

For a third time the gold price correlated with rising interest rates. For example in the article entitled the golden dilemma claude erb and campbell harvey found very strong negative correlation between real interest rates and gold prices from 1997 to 2012 to the tune of 0 82 while 1 means a perfect negative correlation. The price of gold is ultimately not a function of interest rates.

In fact gold prices are driven not by nominal rates which are not adjusted for inflation but by real rates which are nominal rates adjusted for inflation. Like most basic commodities it is a function of supply and demand in the long run. Interest rates plunging to near 0.

The gold 12 month forward rate is roughly the same implying the lease rate is zero. The data confirms that there might not be negative correlation between gold and the federal funds rate or between gold and nominal bond yields see the charts below. Many people believe that the price of gold is inversely related to interest rates.