Interest rates and gold

The Monetary Policy Committee is a committee of the Bank of England, which meets to decide the official interest rate in the United Kingdom. Despite only meeting eight times a year, a particularly significant event such as Brexit, or the Covid-19 pandemic could force the committee to discuss interest rates more frequently, with their decision having potentially strong repercussions on the gold price and the condition of national and international markets.

The correlation between interest rates and the gold value

According to The World Gold Council, there is usually a negative correlation between gold and interest rates. This is because when interest rates rise, it is usually an indication of a strong and thriving economy, which gives investors’ confidence to buy stocks, shares and bonds. 

Conversely, lower interest rates often suggest concerns relating to economic growth, which generally causes investors to flock towards more ‘safe haven’ type assets, such as gold, to protect their wealth.  This surge in demand for gold has traditionally resulted in it increasing in value.

Would you like to see more articles like this one?

The Royal Mint prepares a free, regular bullion newsletter via email with articles like this one, as well as news and current events that we think may be interesting to investors and anyone who follows financial developments. If you would like to subscribe, simply enter your details below.

 

Feefo logo