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Gold and Interest Rates

Last Updated March 2023

Category: Invest


The gold price and interest rates have traditionally worked in opposition to one another. Typically – although not always – when one goes up, the other tends to go down. We look at the impact of interest rates on the gold market, including when investors tend to buy gold in relation to how interest rates are performing. 


  • What are Interest Rates?
  • Interest Rates and the Gold Price
  • Interest Rates in the News



What are Interest Rates?

An interest rate is the premium added to a loan by the lender and charged to the borrower. The Bank of England bank rate is the percentage of interest it charges when lending money to high street banks and building societies in the United Kingdom, which in turn dictates the interest that those banks and building societies will charge to their clients.

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


Interest Rates and the Gold Price

According to the World Gold Council, the global authority on gold, there is usually a negative correlation between the gold price and interest rates. When interest rates rise, it typically indicates a strong and thriving economy, which gives investors the confidence to buy stocks, shares and bonds. This lowers the demand for gold and reduces its value.

Lower interest rates, on the other hand, can imply economic stagnation, which generally causes investors to flock towards assets viewed as safe havens, such as gold, to protect their wealth. This surge in demand for gold has traditionally resulted in it increasing in value at times of low interest.



“Rising interest rates clearly impacted precious metals investment in 2022, with gold exchange-traded funds (ETFs) experiencing net outflows globally. Much of this may be due to professional investors taking a more risk-on approach. However, retail bar and coin investors appear to have taken a different view, perhaps unconvinced that the action taken by central banks will ultimately be successful in bringing down inflation. The Royal Mint sold 25% more gold and 29% more silver in 2022 than in 2021 – which was itself a record year! 2022 also saw central banks add gold to their own reserves, bringing the total volume of gold held by central banks back up to levels last seen in 1974. Central banks have been net purchasers of gold since 2009.”

Stuart O’Reilly, Market Insights Analyst, The Royal Mint


Interest Rates in the News

In December 2022, the base interest rate rose to 3.5%, a height of which had not been seen since 2008. The Bank of England raised the rate in an attempt to curb the rate of inflation and ease the cost-of-living crisis.

To speak to a member of the Precious Metals team about adding gold to your investment portfolio, please book an appointment or call Customer Services on 0800 032 2154 and arrange for an account manager to call you back.

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