Reply To: Some questions


I should have clarified and said it wasn’t really a general rule, and that gold doesn’t always go up with interest rates, that was my bad. My observation is that gold sometimes go up with interest rate hikes, and sometimes it doesn’t. But I do not really see the opposite happen that much at all (where the price goes down). The argument I hear is that the opportunity cost to hold gold goes up as interest rates rise, but that doesn’t seem to be the case, and there are cases where it seems gold goes, even when the spread between interest rates and inflation increase (real interest rates increase). The argument makes sense when it comes to gold as a consumer good, where if rates were to rise, people would save more and demand less gold. But it looks like the reason that gold doesn’t seem to drop all the time when rates rise is because a portion of demand for gold seems to come from a function of a medium of exchange, so people hold gold to sell later to buy dollars instead of actually holding dollars itself.