The Bank of England has this morning slashed interest rates by 0.5% in an attempt to mitigate the impact of the coronavirus on the British economy which, the Bank of England said ‘could be sharp and large, but should be temporary’. The move is expected to encourage mortgage lenders to cut the cost of mortgage bills along with the cost of bank loans.
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.
Precious Metals Director, Andrew Dickey commented: ‘There’s already been a significant surge in demand for our gold products this morning following the news of the cut in interest rates, with our iconic gold Britannia 1oz coin proving extremely popular amongst investors.’
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