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Gold goes up when interest rates go down. The interest rate on gold is always negative - there is cost to storing it. But usually you can find someone who will
by pjdemers 6y ago
Gold goes up when interest rates go down. The interest rate on gold is always negative - there is cost to storing it. But usually you can find someone who will pay interest on dollars. So there is a cost to holding gold over dollars, the lost interest plus the storage cost. Right now that number is close to zero. It may become negative, that is, cheaper to store gold than hold dollars. That's why gold is going up.
- starbugs 6y agoOn the other hand, gold has historically kept up with inflation. So it's also going up when interest rates are high. Just look at its performance in the 2000s before 2008. Also there have been periods where it has been going down even though interest rates were low (e.g. after 2011). I would much rather argue that the value of gold is loosely correlated with money supply over the long run. The current short term surge in gold prices seems to be driven by fear and lack of other secure investment opportunities.