Gold’s Allure Tied to Interest Rates

USfunds.com reports any pullback in gold should be muted as compared to stocks, bonds, and other commodities.

The editorial is quoted as saying:

The act of central bank money printing temporarily drives down nominal interest rates, while at the same time creating inflation and lowering the intrinsic value of the currency that is printed. Therefore, subtracting rising rates of inflation from falling nominal interest rates results in a falling real rate of interest. Once real rates become negative, the liability of holding gold, which offers no interest income, disappears. The more real interest rates fall, the greater incentive for investors to own gold.

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