Is there a relationship between movements of gold price and interest rates?

Answer 1

There is somewhat of a relationship. If interest rates rise dramatically as they did in the early 80s, people will tend to invest their money in interest bearing instruments rather than gold and the price of gold will fall. When interest rates are very low as they currently are, gold becomes a much more attractive investment relative to interest bearing investments and the price of gold tends to increase.

Answer 2

Interest rates are generally a response to inflationary pressure. If inflation is rising, the value of the dollar falls and people will move their money into gold which is a store of wealth and preserves purchasing power. When inflation is rising, the Fed will raise interest rates to drive down inflation, as inflation decreases, people will shift their money out of gold to investments that yield higher returns due to higher interest rates.

For example, in the 1970's inflation took off and gold shot up to $850/oz. As a response to the inflationary pressure the Volcker Fed raised rates dramatically (double digit interest rates) and in worked and inflation fell, in the early 80's and in turn, gold began to fall in the early 80's from it's $850/oz. high.

Answer 3

Sure... It is the most basic law of capitalism...
If there's a lot of people interested in buy gold, its price tends to increase, because those who sell gold will have great profits.
If there are few people interested, the prices would be lower, because while the seller needs to just sell it, the one who will buy must not be willing to pay an expensive gold.

Answer 4

muncie has it. High interest rates tend to hurt gold unless directly due to high inflation.

Answer 5

Yes.