Gold demand is increasing despite the turnaround in interest rates: experts warn

Experts warn that the price of gold will have a hard time with interest rates turning around. But the fans buy the precious metal for completely different reasons – and gossip about Bitcoin.

WHow will gold fare as an investment in the upcoming turnaround in interest rates? Ironically, gold analysts are not particularly confident. “I’m skeptical,” says Frank Schallenberger, gold specialist at Landesbank Baden-Württemberg. The only good news for him gold price came last from the gold securities ETC (“Exchange Traded Commodities”). Since the beginning of the year, they have recorded inflows of 240 tons of gold. But otherwise? Everything mau. Jewelry production, global demand for bars and coins and central bank gold purchases: in many areas demand is weaker than a year ago, while the gold supply has increased. And that with a very firm dollar and rising interest rates. “For me, that means: Stay away from gold!” says the gold expert.

The turnaround in interest rates, longed for by many savers and feared by house builders, is beneficial for investing in interest-free precious metal a burden. American monetary policy in particular slows down the development of the gold price with every message from the Federal Reserve (Fed) about higher interest rates. Firstly, because higher interest rates on fixed-income securities such as US government bonds make non-interest-bearing gold relatively less attractive. And on the other hand, because higher interest rates in America make the dollar more attractive and therefore stronger, which makes gold more expensive outside the dollar area; this slows demand and weighs on the price of gold. This effect seems to be stronger at the moment than many investors’ fears of the consequences of the Ukraine war and inflation.